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Second Kinaxis shareholder urges Kanata software firm to explore sale

September 18, 2024

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Another investor is taking Kinaxis to task for not aggressively exploring a sale after the Kanata-based company said this week it will continue on its current path of trying to maximize shareholder value. New York-based Irenic Capital Management said in a statement Tuesday it is “deeply concerned” that the board of directors is “not acting responsibly or in the best interests of Kinaxis and its shareholders.” The investment firm was reacting to a news release from Kinaxis earlier in the day in which the supply-chain management software maker said it had hired Goldman Sachs to advise it on maximizing its value to shareholders. “The board strongly believes that execution of its strategic plan is the best path to maximize shareholder value,” the company said. The statement suggests the Kinaxis board is not keen on pursuing a potential sale – a course some key investors have urged it to follow in the wake of a steep decline in Kinaxis’s stock price since late 2020 as well as the pending departures of CEO John Sicard and chief sales officer Claire Rychlewski. Irenic said Kinaxis is at a “critical juncture” and faces “clear challenges” as it looks to replace Sicard and Rychlewski. “In a situation like this, all value-creating alternatives should be explored before embarking on any single path,” the investment firm said. “A genuine and robust dual-track approach – in which on one track, the company attempts to identify the best possible CEO candidate and head of sales, and, on the other track, it evaluates and solicits interest in Kinaxis from a thoughtfully constructed group of potential financial and strategic buyers – is the right and logical next step.” Refusing to take that step is “irresponsible and contrary to the fiduciary duties of the Kinaxis directors,” the statement added. “The board cannot make a decision about the best path without first considering the alternative paths – and it is clear the board is simply unwilling to do that.” Irenic Capital Management is the second significant shareholder to urge Kinaxis to consider putting itself on the auction block. Less than two weeks ago, New York-based investment firm Daventry Group sent a letter to the Kinaxis board calling for it to “immediately formalize a process to explore a sale” with the aim of bringing in new owners to oversee the hiring of Sicard’s successor. Daventry, which owns about 1.4 per cent of Kinaxis, said it believes putting the software firm on the block would trigger “an enormous amount of interest from both strategic and financial acquirers that could allow Kinaxis to immediately close the valuation gap” with its peers. “Given that the company’s issues are self-inflicted and execution-related, not product or market-related, we believe potential acquirers would pay a healthy premium for Kinaxis as a scarce high-quality strategic asset,” the letter added. Founded in 1984, Kinaxis is a global leader in software that helps manufacturers keep track of their supply chain systems in real time. Its customers include Procter & Gamble, IBM, Lockheed Martin and Volvo. Since Sicard took over as chief executive in 2016, Kinaxis’s annual revenues have quadrupled to more than US$400 million, while the company’s headcount has grown more than 400 per cent and its market valuation has tripled as demand for its platform has skyrocketed. But the firm’s share price has stagnated over the past year amid economic headwinds that have slowed sales cycles. Meanwhile, a number of other key executives, including former president Paul Carreiro, chief strategy officer Anne Robinson, chief marketing officer Margaret Franco and vice-president of key accounts David Anderson, have left the company since the start of 2024. In May, Kinaxis announced it was laying off six per cent of its workforce in a restructuring aimed at funnelling more money into R&D, marketing and other areas. Last month, the company said its revenues for fiscal 2024 would likely come in at the lower end of its projected range of US$483 million to $495 million. In a news release in late August announcing Sicard’s retirement, Kinaxis reaffirmed its most recent revenue predictions and said it is “shifting its focus from building to scaling.” Kinaxis shares were up $2.23, or nearly 1.5 per cent, to $155.48 in late-morning trading Wednesday on the Toronto Stock Exchange.