GuestLogix faces activist investor
Get ready for a scrap.
That was the message Friday as Goodwood Inc., an investment management firm run by Peter Puccetti and no stranger to shareholder activism, announced it wanted to “reconstitute the board,” at GuestLogix Inc. And “in the absence of a timely consensual reconstitution,” Goodwood, which has already had some discussions with the company about its plans, said it “intends to seek to reconstitute the board at GuestLogix’s next annual meeting of shareholders.”
Goodwood’s clients own about 4% of GuestLogix, which defines itself as “the leading global provider of ancillary-focused merchandising, payment and business intelligence technology to airlines and the passenger travel industry.” Goodwood wants three board seats, including a new chairman, Arthur Mesher — the former chief executive at Descartes Systems Group Inc.
The current chairman is Leo Desrochers, a former senior executive at Air Canada.
On Friday, Mr. Puccetti said, “We have a compelling opportunity to dramatically strengthen GuestLogix’s board, execution and credibility, which have been holding back the company’s success for too long.” Mr. Puccetti, who has had “discussions with other substantial shareholders,” added “the opportunity to add someone of the stature of Art Mesher as chairman, with his unique skill-set and track-record of overwhelming success, is something that any straight-minded board would and should jump at.”
One benefit of a large board position — if successful, Goodwood will have three of seven seats — it will be easier to make managerial changes.
Underlying Goodwood’s stance is that GuestLogix’s management is not moving quickly enough to take advantage of the expected explosion in ancillary revenues that will be generated by the airlines and other transporters as passengers enjoy commerce while travelling. GuestLogix has long-term contracts with numerous airlines and earns a small fee on each transaction.
Chicago-based Kabouter Management, LLC, according to Bloomberg, has an 8.9% stake, which makes it the largest shareholder. Reached Friday, Mr. Kabouter said “We commend Goodwood for having acted as a catalyst in this regard. Shortly after [Goodwood approached the board] we were consulted by GuestLogix …. and learned that the company intends to make meaningful improvements to the board, including by significantly increasing the percentage of independent directors. We are pleased with the company’s shareholder-friendly and responsive course of action.” GuestLogix said it had “no comment.”
The market has reacted negatively to GuestLogix’s most recent acquisition, the US$41.2 million purchase of Dublin-based Open Jaw Technologies. The deal was financed with $19 million of subscription receipts ($0.95 per receipt) and $20 million of 7% convertible debentures.
Analysts and investors were disappointed with the purchase’s strategic rationale. After the announcement, the stock, which had been trading above $1, a share, fell to around $0.60. It closed Friday at $0.85.
But Mr. Kabouter is excited by the acquisition. “The deal, which is also very accretive, is game changing because it creates the world’s first and only complete ancillaries platform.”