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Constellation Software Inc., Canada’s second-largest tech company by market value, said it’s considering eliminating its quarterly dividend and using the cash to make larger acquisitions.

Constellation Chairman Mark Leonard said in a letter to shareholders the company’s board decided Friday to stop paying special dividends “in all but the most compelling circumstances" and may cut the regular quarterly payout too, if it can find deals to use its free cash flow.

The Toronto-based company buys and operates specialized software businesses and has produced huge returns over time with that strategy. The stock rose 3,223% over the 10-year period ended Dec. 31, 2020. With a market value of C$34.2 billion ($27.1 billion), it’s one of Canada’s 25 largest public companies. Shopify Inc. is Canada’s largest tech company with a market cap of C$227 billion.

Constellation has paid a regular quarterly dividend since 2012 and has paid three special dividends in the past decade -- the last being a $20-per-share payout in 2019, according to data compiled by Bloomberg.

But Constellation is now changing tack, Leonard said in the letter. The company will try to increase the number of large acquisitions it makes of vertical-market software (VMS) companies -- deals “requiring multihundred-million-dollar equity cheques" -- and may sacrifice the payout to do so, he wrote.

“If we are successful in acquiring one or two large VMS businesses per annum, then I anticipate that CSI’s return on investors’ capital will decrease, but we will not have to return any of our free cash flow to shareholders," Leonard wrote.

It’s also beginning to look for deals outside of the VMS industry, the chairman said.

“That will require highly contrarian thinking and is likely to be uncomfortable in the early going. Hopefully, we have built enough credibility to warrant your patience as we explore new and under-appreciated sectors," Leonard said.

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