Dye & Durham Ltd. DND-T has been hit by a mass boardroom defection, with three of its seven directors – including chairman Arnaud Ajdler, the hedge-fund manager who led a successful activist campaign to overhaul its governance last year – quitting the embattled legal-software firm, the company said Thursday.
Mr. Ajdler, founder of New York’s Engine Capital LP, swept in a new board at last December’s annual meeting. He, along with five hand-picked nominees that he’d recruited, joined the board. A seventh was nominated by ex-chairman Tyler Proud’s holding company under a shareholder-rights agreement.
Support for the new slate from disaffected shareholders, including Mr. Proud, was so overwhelming that the company pulled its rival slate before the vote. The dissidents had favoured sweeping changes atop the company led by Mr. Proud’s brother, Matt Proud, who agreed to step down as chief executive officer weeks before the meeting.
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Tyler Proud’s nominee, Eric Shahinian, is also stepping down, as is Sid Singh, one of Mr. Ajdler’s hand-picked nominees who briefly served as CEO this year.
Joining the board as chairman is veteran director Alan Hibben, formerly chairman of Home Capital, and recently appointed CEO George Tsivin.
“I am pleased to have found a very capable chair,” Mr. Ajdler said in an e-mailed statement to The Globe and Mail. “I remained on the board for a period after appointing George as CEO to support his efforts. Now, with Alan and George as board members, it is time for me to step away.”
Mr. Hibben said in a statement that he was pleased to join the board “at this important moment for the company.” He added that “with time, effort, and George’s leadership, I believe the company can thrive.”
The shakeup follows weeks of negotiations between Tyler Proud and the board in advance of next month’s annual meeting. Mr. Proud has pushed for the company to refresh its governance again and had a slate ready to put forward, said a source familiar with the matter. Mr. Proud was trying to avoid a proxy fight and felt he had a deal with the company before Thursday’s resignations, the source said.
The job of recruiting new directors for the meeting and dealing with an unhappy Tyler Proud, one of D&D’s largest shareholders through his holding company OneMove Capital – who could still propose a rival slate – now falls to Mr. Hibben.
The Globe is not identifying the source as they are not authorized to discuss the matter.
Tyler Proud said in a statement that the three departing directors had overseen rising costs and “reckless decisions” by D&D, and accused them of “vanishing six weeks before the AGM in a calculated bid to dodge accountability.”
“At this stage, the remaining directors should also step aside so shareholders can install a board capable of getting this company back on track.”
The boardroom exodus is the latest in a recent string of troubling developments at the company. D&D has less than a month to file its delayed audited financial statements for its most recent quarter or the heavily indebted company will be in default under its senior credit agreement.
The company is also pursuing a second extension from the Ontario Securities Commission after failing to file its annual filings on time for its fiscal year ended June 30.
D&D this month reported preliminary unaudited results for last year and the first quarter that were below expectations. Last month, S&P Global Ratings and Moody’s Ratings cut their credit ratings on the company, flagging concerns about its leadership and governance issues.
The stock crashed twice in one week in October, after Matt Proud withdrew his offer to buy D&D for $10.25 a share, then when the company disclosed CIBC Capital Markets had backed out of leading a strategic review that could lead to the company’s sale.
The stock crashed a third time and hit another all-time low of $2.69 on Thursday, down more than 80 per cent in the past year. The company went public at $7.50 a share in July, 2020, and topped $50 a year later.
D&D’s continuing turmoil follows years of concerns by large shareholders about the acquisitive company’s rising debt, its management and governance under Matt Proud’s leadership, which culminated in their support for Engine’s campaign last year.
The new board led by Mr. Ajdler, a veteran activist investor, was supposed to quickly hire a new CEO and lead the company’s renewal. But the hiring effort dragged on as two directors held the job on an interim basis, and the company rehired and then quickly fired a former chief financial officer.
Mr. Tsivin joined midyear but was sued by his former employer, Relx PLC, for allegedly violating his notice requirement and noncompete agreement.
Matt Proud also led his own activist campaign against D&D, agreeing to back off in July when the company reached a standstill agreement with him. The company recently sued to enforce its co-operation agreement, and Mr. Proud and his investment company, Plantro Ltd., agreed to consent to a temporary injunction that D&D had sought.