Crescent Capital takes control of Cardno

Crescent Capital upped its investment in the ASX-listed infrastructure firm without seeing the books and aims to undertake a turnaround.

Crescent Capital Partners acquired the largest shareholding in Cardno and assumed control of the international infrastructure and environmental company’s board because it believed that company was mismanaged and that the cost structure did not reflect “market reality”, it is understood.

Crescent believes it can turn the Australian-listed company around in a three to five-year timeframe, by improving its cost-structure and balance sheet, it is understood.

It relied on publicly available information and did not get access to the company’s books to conduct due diligence before increasing its stake to 44 percent, a person familiar with both companies said.

Over the year, Crescent built up a 19.6 percent holding in Cardno and in September it made a proportional takeover offer that valued the company at A$520 million ($374 million; €341 million), which was rejected, according to a report. Through a following offer in November it acquired 40.9 percent.

The further enlarged stake was obtained following another share offer in late November as part of the company’s recapitalisation plan that came after Crescent assumed control of the board earlier in the month.

In early November, the Cardno board increased from six to seven directors, including three Crescent representatives, and agreed on a transition plan.

By February next year, the remaining three Cardno non-executive directors, including the chairman, will resign and will be replaced by an equivalent number of new independent non-executive directors.

Cardno reported a net operating profit after tax of A$50.3 million for 2015, a 35.6 percent decrease compared to the 2014 financial year. It also recorded a net loss after tax of $145.2 million, after writedowns, according to Cardno’s annual report.

Crescent, which is headquartered in Sydney, invests in companies located in Australia and New Zealand with enterprise values between A$50 million and A$300 million.

It has made over 25 platform investments to date, and about 60 add-on acquisitions. This includes taking an 80 percent stake in ASX listed Clearview, a life insurance and wealth management business, which it acquired in 2012 for a reported A$262.8 million.

Crescent reached a final close on its fifth Australia and New Zealand-focused fund at the hard cap of A$675 million after only 10 weeks in the market in November 2014. Its previous fund, closed at A$490 million in 2012.