New York hedge fund Engine Capital, which owns 7.1 per cent of the Toronto company’s stock, says it plans to nominate six directors to Dye & Durham’s seven-person board at the Dec. 17 AGM.Elijah-Lovkoff/iStockPhoto / Getty Images
Dye & Durham Ltd.’s DND-T main shareholder antagonist is escalating its governance battle with the legal-software company, proposing a near-full rival slate of directors for next month’s annual general meeting.
New York hedge fund Engine Capital, which owns 7.1 per cent of the Toronto company’s stock, says it plans to nominate six directors to D&D’s seven-person board at the Dec. 17 AGM. Engine had proposed earlier this year to replace three incumbent directors with its own nominees.
Engine’s five candidates other than its founder, Arnaud Ajdler, all have senior executive experience with public companies, including two from the legal information services space: Hans Gieskes, former chief executive officer of RELX PLC’s LexisNexis Group; and Anthony Kinnear, former president of Thomson Reuters Corp.’s TRI-T legal professionals’ unit.
The other candidates are Tracey Keates, former chief financial officer of Constellation Software Inc. unit Jonas Software; Ritu Khanna, Shopify Inc.’s SHOP-T global partnerships vice-president; and Sid Singh, CEO of Rectangle Health and a former executive with Equifax Inc. and Global Payments Inc.
“We have assembled a world-class slate of directors to fix Dye & Durham and close its large valuation gap,” Engine said in a release Monday.
“There is no reason why the stock should be trading at such a discount to peers … other than the board’s inadequate oversight and management’s poor execution.”
Engine pledged to send shareholders details about its slate’s transition plan and strategy to increase cash flow, cut debt and restore trust.
D&D countered in an e-mailed statement that “Engine and its partners are engaged in a zero-premium takeover” and a “flawed campaign.” The company accused Engine of repeatedly levelling baseless assertions and showing ”a bewildering lack of understanding of the business, underscored by its third round of weak and unknown nominees.”
D&D has been engulfed in controversy since going public in July, 2020. Its penchant for buying legal-software companies with dominant competitive positions and then sharply hiking prices has angered clients. An attempted multibillion-dollar takeover of an Australian company failed, and Britain’s competition regulator forced it to divest a purchase.
The board proposed a rich compensation package for CEO Matt Proud in 2021 after management abandoned an attempted buyout, which prompted shareholders to withhold a significant number of votes from two compensation committee members while still approving the award.
D&D has taken steps to ease its heavy debt load and cut costs, but its stock has languished well off its peak levels since early 2022. Its shares rose last month after the company said it was open to being sold as part of a continuing strategic review.
Court filings show that ex-chair Tyler Proud, the brother of the CEO, and other investors grew frustrated in the past two years with D&D’s strategic direction, mounting debt, pace of acquisitions and board oversight over management. Their efforts to confront the board led to the replacement of two directors last year, while several shareholders withheld votes for then-chair Brian Derksen at last December’s AGM, though he still won.
Engine had originally called for a special meeting earlier this year for shareholders to vote on its proposal to remove Mr. Derksen, current chair Colleen Moorhead and Leslie O’Donoghue from the board and replace them with three different nominees than the names it now proposes.
Ms. O’Donoghue later resigned and was replaced by Luke McCormick, managing director of Toronto investment management firm Generation Capital. He was appointed by D&D as part of a peace deal with another activist, hedge fund Blacksheep Fund Management Ltd.
OneMove Capital, Tyler Proud’s holding company, has also pursued board changes. D&D had scheduled a special meeting for shareholders to vote on Engine’s original proposal for Aug. 20 but postponed after OneMove tried to force D&D to add a proposal of its own: to vote off its prior board nominee, Ted Prittie, and replace him with a new one.
Under an investor rights agreement, OneMove is entitled to nominate a director at shareholder meetings but lacks the unilateral right to remove its nominee. Tyler Proud told the Ontario Superior Court he lost confidence in Mr. Prittie, and after asking him to quit to no avail, OneMove tried to piggyback on Engine’s meeting with its proposal.
An Ontario Superior Court justice ruled in September that OneMove couldn’t do that and would have to request a separate meeting. Instead, OneMove is expected to nominate a new director at the annual meeting.
Engine cancelled its special meeting request because of the delay, saying it would instead put up a slate at the AGM.