A Transformation’s Sweet Spot

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A Builder Philosophy To Governance

“If anything is worth doing, do it with all your heart.” -Buddha

As we are in the midst of proxy season, we are more active as a firm than we’ve ever been — as our investors already know. As a firm we have always sought to partner with world class managers building under-appreciated companies during transformational moments in their history.

It has been a privilege and honor to be able to have partnered with four companies thus far, in their profound transformation journeys. Since that journey started in 2019 at CTT, we’ve continued with Leonardo, MEI Pharma, and more recently Jack in the Box. Furthermore, we look forward to more engagements in the weeks and months ahead.

Our goal is not to be an “Activist,” as traditionally known, but we aim to be “Builders.” That implies a very different goal than the traditional activist playbook, as being closer to what Exor has articulated, as a goal to “build great companies.”

We believe the best board members prove their worth and service to shareholders mostly outside of the board room. It’s a labor of love, and requires a lot of time and attention for each board member. The best ones we’ve observed often dedicate a full 40-hour week to their mandates in peak periods, as we often do — particularly in times of the most intense transformation.

They not only will put their skin in the game and gladly buy meaningful stakes in the companies where they serve, but they will put their soul in the game by committing their precious time to the company. Time is the ultimate way we honor our commitments, and great board members don’t simply “dial it in.”

Fresh Eyes, Better Engagement

“He that will not apply new remedies must expect new evils; for time is the greatest innovator.” -Francis Bacon

In our observation, transformations are always best accomplished with a balance between new outside views, and internal legacy knowledge and expertise. As long as both fresh eyes and incumbent managers share a common mission and objective, this allows boards and executive teams to move faster, challenging both “the ways things are done,” while also being mindful of existing constraints, commitments and capabilities.

As many other activists seek to “wipe out” a board or a management team, we have seen time and again, how such strategies are not only inhumane, but they only push back progress by 12-18 months as new leadership and new directors have to re-create the wheel and re-learn all the mistakes from the past.

At CTT, Leonardo, and Jack in the Box, we believe the required transformations were better because they balanced both fresh perspectives but included many incumbent managers and directors that not only acknowledged the need to change, but wanted to be a part of it.

The best part of watching the first two from the inside has been the high-quality team members who were losing stamina or getting demoralized by a company in need of transformation. This often youthful talent within the existing organizations stepped up, ready for a more ambitious challenge, and have helped deliver some of the most inspiring and pivotal parts of these transformations. While some outside perspectives are always required to trigger discontinuity, it’s always the hidden rockstars already inside the organizations that can most rapidly build momentum.

While we are nearly always pushing for faster progress along these journeys, we are always mindful of reality and want these transformations to be done in the most humanist way possible. At the same time, we reflect on the wisdom of Sergio Marchionne that the best way to get to the long-term is for the short-term results to be at minimum satisfactory, and if possible, great. There was no one more humble or focused on the human element in the auto industry than Sergio — for he proved that you didn’t need to focus on results over humanity to deliver. You could honor both simultaneously.

We are incredibly grateful to have been well received by both new and old directors and managers at companies where we have served, and we aim to be great long-term partners for all of them on their quests to becoming truly great companies.

But while the journey to becoming a great company is not a short-term endeavor, the flip side of that achievement is that we don’t need to exit our achievements after a “price target,” or “catalyst,” is achieved. They are great companies treading at reasonable, if not downright cheap prices.

In that vein this week we are honored to be able to re-commit to these journeys this season.

Re-Committed To Deliver

“It’s easier to invent the future than to predict it.” -Alan Kay

On Wednesday, materials were filed for CTT’s next AGM that nominates my colleague and partner Chris to a board position at CTT. Not only is Chris incredibly well versed in the past of CTT — in fact, it was the first stock that we heavily collaborated on when he was at his prior firm– but by leading efforts at the remuneration committee, Chris is not only aware of the opportunities, but also the people and the plan that are required to get the company there.

Most importantly, the time I have been spending in Portugal has been naturally declining in the recent years as other commitments have taken some of my time away from my first governance love. I don’t think that serves CTT shareholders well, as I believe board members owe shareholders a significant amount of their time and effort to push boundaries, ensure opportunities are captured, and risks are ring-fenced.

So I couldn’t be happier that Chris will hopefully soon join CTT’s board at a truly transformational moment. I think 2026 proves to bring more opportunity to the company than any other year, perhaps even including the Covid acceleration of e-commerce.

The business model that incorporates customs into its core offering is able to play proactive “offense,” in an industry where peers are largely standing around waiting to see what will happen — and then will react.

Instead, CTT is proactively working with its customers to define the future and be a winner in that future regulatory environment. We believe this year brings more market share opportunities than any year since we’ve been involved.

It will soon be led by existing CFO Guy Pacheco stepping up to CEO. Guy has demonstrated truly world class levels of execution. A great example of his incredible stamina was the simultaneous delivery of operational performance in the middle of network redesigns, and sometimes adverse macro conditions which made the delivery of the company’s guidance even more difficult to achieve.

On top of those responsibilities, he has been at the forefront of negotiating all major transactions that have helped to continue to evolve the business model into a more anti-fragile, higher margin, and more importantly higher return business. He can masterfully shift his attention from technology transformation to operational efficiency programs and then back over to M&A negotiations, all without missing a beat or breath (but perhaps some sleep).

At the same time he has highly entrepreneurial João Sousa constantly challenging the status quo, reaching for discontinuity, and constantly pursuing BHAGs (big hairy audacious goals). I am so grateful for João’s tireless energy that has helped make CTT the fastest growing diversified logistics company in the world.

But in addition to keeping key talent, the team is also taking in fresh eyes, new experts, and new perspectives as it seeks to play offense in a world where most others are playing defense.

Not only has the company been the best-performing logistics company in global benchmarks, I think it has a fighting chance of graduating from the “value world,” to a more growth-oriented investor base over the next year.

Led by a savvy capital allocator, and a highly differentiated business model with multiple competitive advantages laid on top of each other, I think as the company delivers the growth it expects this year — while all peers are guiding to another flat year — it can start to shift perceptions.

Of course, as it makes progress on the strategic alternatives for the bank, the investment story will also become simpler, the financial statements cleaner, and the focus will lie squarely on being an attacker in e-commerce markets that are still highly under-developed.

We think the year ahead, while volatile and full of risks, brings tremendous opportunity — and are excited to recommit to this company as accelerates its journey to becoming a truly great company. I’ve also personally put my money where my mouth is, as regulatory filings will show later today.

The Sweet Spot

“It is not whether you win or lose, but what you win when you win and what you lose when you lose.” -John Templeton

If the curse of a value investor is often being “too early” investing in transformations, the flip side of that well known curse, is selling too early. We thankfully learned our lessons over the past decade and a half, which have allowed both Leonardo and CTT to continue to drive our portfolio performance.

We think CTT in particular is entering the “sweet spot,” of the transformation, where it can deliver on some profound changes to its business model, accelerate the core, and continue to differentiate itself via the competitive advantages it has been building for years.

As our friend Dan Roller at Maran Capital often describes it, it’s moving into the “fun phase,” of proactive and assertive capital and strategic moves. They key is to not decrease risk appetite in this environment, but rather embrace it.

I can’t think of a better time to double down on this investment, to play offense, and to renew the energy and vigor with which the companies seizes the plentiful opportunities in front of it.

I can’t think of a better team to deliver on that. Thanks to the solid progress achieved already, management has become a fairly material owner of shares. As that team largely renews its mandate, it is also getting younger, more energetic, and will move even faster.

And it will remain as committed as ever to deliver.

In an uncertain world, delivery is everything. The conditions are there, the sweet spot is upon us, and the commitment is total.

So I say to Chris and the others today, “let’s go get ’em.”

Onward, Steven

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