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An activist fund is accusing billionaire sports magnate Bill Foley of “egregious corporate governance”, claiming he paid himself and associates hundreds of millions of dollars from his listed holding company at the expense of shareholders.
Carronade Capital Management, founded by Elliott Management alumnus Dan Gropper, plans to launch a proxy fight against Foley’s Cannae Holdings and push for four new directors to join the board at a shareholder meeting in December, according to a letter seen by the Financial Times that will be sent to shareholders on Tuesday.
The activist investor is one of Cannae Holdings’ biggest shareholders, with a 6.1 per cent stake.
Foley has long been a fixture on Wall Street and in the professional sports world. He made his fortune by starting the title insurance group Fidelity National Financial, and today owns stakes in the hockey team Vegas Golden Knights, English Premier League club AFC Bournemouth and Scottish Premiership club Hibernian.
Carronade claims the parent company Cannae, which was spun out of Fidelity National and manages many of these investments — including a hodgepodge of stakes in activist hedge fund Jana Partners, restaurants and a whiskey distillery — has flailed on the stock market even while it has paid Foley and the board of directors handsomely.
The activist has pointed to a series of payments and agreements that it alleges are evidence of corporate governance breaches. Foley was paid $17mn this year in connection with his transition to vice-chair from chair and chief executive in May, and the board of directors approved the company’s purchase of half his shares at a 20 per cent premium to the market.
Cannae did not respond to multiple requests for comment.
Cannae trades at a roughly 33 per cent discount to its net asset value, according to its own recent investor presentation. Its shares have fallen nearly 50 per cent over the past five years while the broader stock market has soared.
“We believe this persistent and significant discount is evidence that shareholders are tired of management siphoning hundreds of millions of dollars out of the business while performance flounders and that the board has lost its credibility to hold management accountable,” Carronade wrote in the letter.
Carronade estimates that Foley, the company’s external manager and management team have been paid $650mn in fees over the past eight years while it currently carries a net asset value of $1.4bn on its balance sheet. Meanwhile, directors of Cannae have received $243mn in payments, according to calculations by Carronade. The activist investor estimates Cannae has returned less than 1 per cent to shareholders annually.
Cannae has said it is trying to boost shareholder returns. In its latest earnings report, it repurchased shares and increased its dividend.
Beyond running sports teams, Foley is known for taking part in the gold rush for blank-cheque companies, also known as special purpose acquisition companies or Spacs, which reached their height on Wall Street during the pandemic.
Foley made a number of Spac deals in recent years. In 2018, he set up a blank-cheque company to acquire life insurer Fidelity & Guaranty Life for $1.8bn alongside former Blackstone dealmaker Chinh Chu. Cannae and Chu had teamed up to buy Dun & Bradstreet in 2018 for $7bn. The pair sold the company this year for nearly $8bn.
In 2020, Foley reached a deal to merge the UK fintech group Paysafe, owned by Blackstone and CVC, with another of his blank-cheque companies at a $9bn valuation.
Cannae last year reincorporated in Nevada, joining the wave of companies that have moved away from the shareholder-friendly state of Delaware alongside Elon Musk’s X and Neuralink. Cannae cited the cost of fighting shareholder lawsuits in Delaware as a reason for relocating. It has not held an annual shareholder meeting in 18 months.
Its executives told analysts in August that its discount to NAV was shrinking as it accelerated its strategy to sell listed investments and return more capital to shareholders.
Carronade said there had been “minor improvements” to corporate governance but believed more could be done.
