Eroad in play: NZSA on Steven Newman’s surprise return, Canadian raiders reveal hand - a little

Former Eroad CEO and current major shareholder Steven Newman has returned as an independent consultant.

Canadian raider Volaris Group has revealed its hand - a little - ahead of an Eroad shareholder meeting in Auckland this Friday.

The firm, ultimately owned by Toronto-listed Constellation Software, said in response to speculation: “Volaris Group wishes to clarify that it currently has no intention to increase its proposal price under its NBIO, although it reserves its right to do so if there is a change of circumstances - including, but not limited to, being granted access to due diligence by Eroad”.

On June 22, Volaris revealed it had built an 18 per cent stake in Eroad and made an unsolicited, all-cash full takeover offer at $1.30 per share - a 69 per cent premium on Eroad’s previous close that valued the firm at $232 million.

On July 12, Eroad’s board said the deal “materially undervalues” its business and fell below the level at which the board was willing to grant due diligence.

Shares closed Monday at $1.44, implying some investors are betting the Canadians will come back with a better offer (all parties are keenly aware the stock hit an all-time high of $6.61 in July 2021 before troughing to 52c on disappointing results and an abrupt and unexpected CEO transition).

Hello, Newman

Monday also saw the return of longtime CEO Steven Newman, who will serve as an independent consultant to Eroad’s Technology Board Committee.

Following his surprise, abrupt departure in 2021, Newman remained the single largest shareholder in Eroad. He currently holds a 12 per cent stake, according to a June 16 filing.

New chief executive Mark Heine told the Herald that Eroad had made strategic missteps including under-investing in the key US market (where it sought to make up time via its $158m acquisition of rival Coretex in a deal that closed in 2021). But Heine also said he had an amicable relationship with Newman, and the pair talked regularly.

Newman took some flak online following his departure.

But the NZ Shareholders Association, which earlier backed Eroad’s board in rejecting Volaris’s offer as too low, said the ex-CEO’s return made sense.

“NZSA regards this as positive as it gives Eroad access to a known, tried and tested technology resource who is, through his significant shareholding, aligned with shareholders and creating shareholder value. We believe this will also support Mark Heine’s strategy of operational and R&D efficiency.”

The NZSA says the best way forward could be Volaris taking a strategic stake - to help fund investment in new products - but not full control.

Eroad shares were flat in early Tuesday trading.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.