Investor Matthew Proud of holding company Plantro Limited at his Toronto office in September.DUANE COLE/The Globe and Mail
Calian Group Ltd. CGY-T is selling parts of its business and seeking new board members after a months-long campaign from one of its major shareholders to streamline the company and focus on its defence business.
In a release Tuesday, the Ottawa-based company said it had entered into a co-operation agreement with key shareholder Plantro Ltd., the private holding company of activist investor Matt Proud, which led to its decision to expedite an ongoing board renewal process and divest “certain non-core assets.”
The company would not specify which assets it is selling, and there is no timeline for when the sale will be complete.
Federal budget 2015: Liberals earmark $6.6-billion to grow defence industry
Mr. Proud has been pressuring Calian to sell its underperforming IT and cyber solutions (ITCS) division, which includes its two U.S. offices, for months now, ever since he bought a 5-per-cent stake in the company in August.
In a written statement Tuesday, Mr. Proud said he was “pleased with the agreement with Calian” and the company’s engagement with Plantro.
Calian’s stock rose by more than 9 per cent Tuesday.
The company has several divisions, including defence, technology, health, training and IT and cyber solutions. It operates out of offices across Canada, the United States, the U.K. and Europe.
It has been undergoing a portfolio review that began before Mr. Proud began applying pressure and is gearing up to welcome a new chief executive officer, Patrick Houston, when current CEO Kevin Ford steps down on Jan. 1, 2026.
Part of Tuesday’s announcement details an agreement between Plantro and Calian to create a temporary committee of independent directors to “act as a resource for management and facilitate active board oversight of these initiatives.”
That committee is made up of board members Josh Blair, Eric Demirian and Val Sorbie.
Stephen Halperin, a lawyer for Goodmans LLP who specializes in mergers and acquisitions, will act as a special adviser to the committee. Goodmans served as Plantro’s law firm during negotiations.
Calian’s board of directors will also undergo a shakeup.
Mr. Houston will join the board in the new year, alongside other candidates Calian says will “help guide the company as it seeks to capitalize on the significant strategic opportunities the company has identified in the defence and related sectors.”
In a note to clients Tuesday morning, analyst Doug Taylor and associate Firuz Yakhyayev of Canaccord Genuity Corp. called the changes positive for the company and its “substantial defence exposure,” especially with regard to Canada’s defence spending boost.
Ottawa plans to spend big on defence. But is there a long-term vision for Canada’s military?
Prime Minister Mark Carney has pledged to bring defence spending up to 2 per cent of GDP this fiscal year and 5 per cent by 2035.
“We believe this provides an attractive backdrop for growth in the coming years, and the removal of non-core assets might help illuminate that growth,” they wrote.
In particular, they pointed to Canada’s intention to spend on health care for the Armed Forces, military training and digital infrastructure as items Calian stands to benefit from.
Plantro sent a letter to Calian’s board of directors in August pressing it to refocus the business and capitalize on the “once-in-a-generation growth opportunity” presented by the increased defence spending.
In September, Plantro followed up with another letter reiterating its desire to see Calian sell its ITCS business, appoint Plantro representatives to the board and initiate a strategic review led by a committee of independent directors recommended by the holding company.
In the letter, Plantro said its plan was “focused on divesting non-core assets, driving organic growth with a much more refined focus on the defence industry, reining in expenses and restoring the trust of shareholders by issuing updated guidance that is rooted in current reality.”
Editor’s note: A previous version of this article incorrectly stated that Stephen Halperin served as Plantro’s lawyer during negotiations. Mr. Halperin is a lawyer with Goodmans LLP, but did not represent Plantro; Goodmans served as Plantro’s law firm during negotiations.