Browning West disclosed in December that it had amassed a 4.3-per-cent economic interest in CAE and sent the company a letter asking for a formal role in succession planning for long-time CEO Marc Parent.Graham Hughes/The Canadian Press
CAE Inc. CAE-T is shaking up its board, bringing in aerospace veteran Calin Rovinescu and a U.S. activist fund manager as directors as the Canadian pilot training company hunts for a new chief executive officer at a pivotal time for its North American business.
Mr. Rovinescu, who led Air Canada as CEO for 12 years until his retirement in 2021, will join CAE as chairman effective Feb. 14, the Montreal-based company said in a statement late Thursday. He replaces Alan MacGibbon, who’s been a director since 2015.
Peter Lee, a co-founder of Los Angeles-based investment firm Browning West LP, will also join the board following a co-operation and standstill agreement with the company, CAE said. He’ll co-chair the board’s CEO search committee with Mary Lou Maher, an existing director, and work closely with Mr. Rovinescu to continue the recruitment process previously overseen by the board’s human-resources committee, the company said.
“Browning West is pleased to have aligned with the board on the critical changes announced today,” Mr. Lee said in a statement e-mailed to The Globe and Mail. “We are confident that CAE has the right foundations to unlock the substantial value creation potential of the company.”
In all, CAE will replace four directors on its 13-member board. Pension giant Caisse de dépôt et placement du Québec, CAE’s biggest institutional shareholder with a 9.7-per-cent stake, named technology entrepreneur Louis Têtu as its representative. Katherine Lehman, a partner at New York-based private equity firm Palladium Equity Partners, is also joining as a director, CAE said.
Browning West disclosed in December that it had amassed a 4.3-per-cent economic interest in CAE and sent the company a letter asking for a formal role in succession planning for long-time CEO Marc Parent, who’s set to retire in August. CAE has the potential to grow earnings and free cash flow “well in excess of current market expectations” in the medium term but it needs to recruit the best possible leader to achieve that, Browning’s co-founders said in the letter.
The developments suggest Browning West was heard. The investment firm is coming off a high-profile win involving another Canadian company: clothing manufacturer Gildan Activewear Inc. Last May, it emerged victorious in a bitter six-month campaign to reinstate Gildan co-founder and CEO Glenn Chamandy.
The Caisse issued its own statement Thursday, saying the board changes reflect CAE’s commitment to renewing its corporate governance, in particular by taking into account the opinions of certain investors.
“Our position as a major shareholder prompted us to play a proactive and constructive role in this renewal process by leveraging our network and influence,” said Kim Thomassin, executive vice-president and head of Quebec investments at the Caisse. She said the appointments highlight “the mobilization of influential individuals” in the province’s business community to lead the aerospace company.
Mr. Parent is widely credited with expanding CAE’s business model from that of an industrial company focused on manufacturing flight simulators to a service company that trains pilots, both civil and military. Annual revenue has nearly doubled under his tenure to $4.3-billion, and the share price has more than tripled.
How the arrival of U.S. President Donald Trump changes the company’s prospects remains to be seen. CAE has a significant training centre footprint in the United States – both for civil aviation and defence pilots – and the Trump administration is likely to push NATO countries to spend more on defence, which could ultimately be positive for CAE’s end-market demand, according to analysts at National Bank of Canada. But its civil simulator manufacturing business is potentially exposed to tariffs.
Browning West has played an activist role with several of its investments, pushing for leaders it sees as the most capable of maximizing returns. The firm’s partners have intervened and taken board roles at four public companies in the United States and Britain in addition to Gildan: Six Flags, Tempur Sealy, Domino’s and Countryside/Vistry Group. They’ve also led seven public company CEO and chairperson searches.