Dye & Durham Ltd. DND-T stock jumped Tuesday following news that Australia’s PEXA Group Ltd. has made an informal bid for the Toronto real estate software company.
Stock in D&D rose 13.1 per cent to close at $17.99 on the Toronto Stock Exchange, while PEXA shares slumped 3.8 per cent on the Australian Stock Exchange, after the Australian Financial Review reported on the approach, citing unnamed sources.
D&D recently launched a strategic review that could lead to a sale, in the midst of a tumultuous 12 months for the company that has included four governance challenges, a debt refinancing, a large staff cut and a continuing investigation by the Competition Bureau for alleged trade-restricting practices.
Both companies were tight-lipped about the report. D&D spokesman Wojtek Dabrowski said the company “can’t comment on market rumours and speculation.” PEXA said in a statement it wouldn’t comment on media speculation, and said it had “nothing to disclose at the time.” PEXA noted it is “continuously assessing opportunities to deliver increased shareholder value.”
Also on Tuesday, D&D confirmed that there will be a showdown at its Dec. 17 annual meeting, after formally accepting a revised notice by activist shareholder Engine Capital LP to nominate an alternative slate of directors. D&D rejected Engine’s original notice on technical grounds, saying it failed to provide adequate detail regarding the circumstances under which the hedge fund became involved as a dissident and or whether it was acting with others. D&D and its board have accused Engine of working with other dissidents to seize control of the company.
In a release Tuesday, D&D said its board considers the revised notice to be deficient but waived “these deficiencies in the interest of shareholder democracy.”
Engine owns 7.1 per cent of D&D’s stock and originally sought to replace three of D&D’s seven directors with its own nominees at a special meeting. But the meeting was postponed because of a separate court challenge by another dissatisfied D&D shareholder, ex-chairman Tyler Proud, brother of chief executive officer Matt Proud. Earlier this month Engine expanded its challenge, proposing to replace nearly the entire board with a six-person slate at D&D’s annual meeting and rebuild the management team.
Several large investors, including Tyler Proud, have expressed growing discontent in the past two years over D&D’s leverage, pace of acquisitions, board oversight over management and rich compensation to the CEO while its stock has remained at depressed levels.
Engine’s five candidates other than its founder, Arnaud Ajdler, have experience as senior executives with public companies, including two from the legal information services space: Hans Gieskes, former CEO of RELX PLC’s LexisNexis Group, and Anthony Kinnear, ex-president of Thomson Reuters Corp.’s legal professionals unit.
D&D’s proposed slate, unveiled last week, is also much different than its last elected board. Four of its seven proposed directors would be newcomers, including Mark Ernst, former chief executive of H&R Block Inc., and David Oppenheimer, president and chief financial officer of Oppenheimer Advisors. New York hedge fund manager Eric Shahinian is the nominee of Tyler Proud, under a shareholder rights agreement between the personal holding companies of the two brothers and D&D. Luke McCormick, managing director of investments and a partner with Toronto’s Generation Capital, is nominated under a peace deal with another activist investor in D&D, Blacksheep Fund Management Ltd., after the Irish hedge fund pushed to elect its own nominee.
The remaining company nominees are incumbent Ted Prittie, chair Colleen Moorehead and Matt Proud. Ms. Moorehead was elected last year at the behest of dissatisfied shareholders. Mr. Prittie was Tyler Proud’s nominee in past elections, but he attempted unsuccessfully this year to get shareholders to vote him off at Engine’s originally scheduled special meeting and replace him with Mr. Shahinian. In a fraternal snub, Mr. Prittie has been nominated by the CEO’s personal holding company as per his rights in D&D’s shareholder agreement.
D&D last week defended its track record and strategy since July, 2020, and released a “value creation plan” that commits it to reducing net debt from 5.2 times operating earnings to below four times, while continuing to pursue strategic acquisitions and selling non-core assets.