Market Overview

Highfields Capital Comments on End of CoreLogic's Strategic Review


Highfields Capital Management LP, the largest shareholder of CoreLogic, Inc. (NYSE: CLGX), today made the following statement in response to CoreLogic's announcement ending its strategic review process.

Jonathon S. Jacobson, Founder, CEO and Chief Investment Officer, said, “We are very disappointed that the CoreLogic management and Board have once again failed to generate value for shareholders. Coming on the heels of operational failures that cut share value by 60% little more than a year after its 2010 split from First American Corporation (NYSE: FAF), it's clear that CoreLogic's substantial operating upside can only be captured with a change of leadership and governance.

“We have long been CoreLogic's largest independent shareholder, and since 2007 have provided private advice and input and patiently waited for the Company to address its admitted shortcomings and act in the interests of shareholders. The Board's decision to abandon the strategic review process and continue business as usual is troubling in light of the Company's long history of financial and operational missteps despite its irreplaceable, world-class assets. Shareholders should rightly question whether the failed process is a result of the current Board's desire to maintain control rather than doing what is in the best interest of shareholders. While we agree with the Board that there is tremendous potential for value creation, current management has proven without a doubt that it is incapable of managing expenses and seizing on revenue opportunities.”

The operational and financial missteps at CoreLogic include:

Management's consistent inability to forecast its own performance, from failing to meet the financial projections in its very first 2010 Investor Day presentation, to constant revisions of guidance throughout 2011 and now 2012.

Worse still, management's inability to measure actual performance, resulting in costly mistakes in operations and capital allocation. For example, apparently unaware that it was substantially underperforming its own projections, CoreLogic spent $161 million during the second quarter of 2011 to repurchase 8.7 million shares at an average price of $18.51 (including four million from FAF, a related party, for $18.95 per share). Subsequently, after reporting that quarter's earnings in early August, CoreLogic shares dropped to below $8/share prior to the Company commencing the strategic review process later that month.

A dismal track record in acquisitions and dispositions, including buying in the publicly traded minority shares of majority-owned First Advantage Corporation (FADV) in November 2009 for an implied value of $1.1 billion even as FADV was falling short of its own internal projections. Within two years, FADV's businesses were either shut down for a loss or sold at significant discounts to cost, and what is left is worth far less than what CoreLogic paid. In addition, less than a year ago, CoreLogic increased its stake in RP Data Limited, an Australian company, from 40% to 100% for A$194 million, a valuation representing approximately 9.5 times RP Data's projected EBITDA and well in excess of RP Data's current value.

Jacobson continued, “As much as anyone, we hope that the Company can deliver on the 2012 projections it confidently made in its earnings release. However, given its history of mismanagement, CoreLogic requires a change in leadership to meet these projections and seize the growth opportunities that have long been available to it. We look for the Board to acknowledge this reality and promptly act accordingly. To be clear, maintaining the status quo is not an option.”


Related Articles (FADV + CLGX)

View Comments and Join the Discussion!

Posted-In: M&A News