Gary Yeoman, former chief executive officer of Altus Group Ltd., is gone from the real estate consultancy he helped found.
This morning the firm announced Mr. Yeoman is “no longer employed by Altus Group , effective immediately,” and will be replaced by Stuart Smith, the former CEO of Oxford Properties Group. No ‘leaving for personal reasons’ in the statement, just a “best of luck” send off.
The decision was made just six months after Altus closed its $130-million (U.S.) acquisition of Argus software, its biggest to date. To fund the deal, Altus loaded up on debt, bringing its current net debt to EBITDA multipe north of five times, amending its debt covenants in the process.
It’s the same story you see again and again. A company loads up on debt to grow by acquisition, but investors get skittish and start running away. In Altus's case, the problems were compounded by the fact that the company used to be structured as an income trust, so a number of people held it for the yield. When the acquisition was made, it slashed its divided by 50 per cent, sending the yield investors fleeing.
Before the announcement Thursday morning, Altus was down almost 80 per cent year to date. The stock has popped 10 per cent since.
Altus bought Argus Software for $130-million, funded with $80-million in cash from a credit facility and a $50-million convertible debenture. The convert has raised a lot of eyebrows because it offers the holders the right to convert to equity at 95 per cent of the market price if the debt is still outstanding in June 2013.
When the deal was struck, Altus had plans to pay down debt through divestitures, but there has been no action on this front to date. Organic revenue has been growing (13 per cent year-over-year in the last quarter) but much of that rise is offset by higher corporate costs and interest payments.
Watching its stock plummet must be frustrating for the company. The strategy behind the Argus acquisition made a lot of sense. Altus has lots of data and Argus has software that utilizes this information, so it was a perfect fit. Plus, just last summer, Altus had big hopes for expanding in the U.S.
Mr. Yeoman, the former CEO, previously worked at Magna International, where he handled the auto part giant’s real estate portfolio. He helped to create Altus in 2005 by merging three Canadian companies, including his own property tax consultancy.