Matt Proud, seen in his Toronto office, in November submitted his third bid this year to buy D&D.DUANE COLE/The Globe and Mail
Two weeks after offering to buy Dye & Durham Ltd. DND-T for $384-million, ex-chief executive officer Matt Proud and his private holding company Plantro Ltd. are suing the Toronto legal-software company and its board for $200-million, alleging that it has acted to thwart their interests.
The suit, filed Tuesday with Ontario Super Court, is a counterclaim against the company after it sued Mr. Proud and Plantro in October to get him to honour a July standstill agreement with D&D. The company claimed that he had acted improperly and unlawfully to derail a fair sale process and “serve their own ambitions of acquiring the company at an artificially depressed price.”
The legal battle is unfolding as Dye & Durham faces a Dec. 18 deadline to file delayed financial statements. If it doesn’t it will be in default under its senior credit agreement. D&D said last week that it expects to file the statements that week.
It is also subject to a voluntary cease-trade order from the Ontario Securities Commission that prohibits chief executive officer George Tsivin and interim financial officer Sandra Bell from trading in its securities until two business days after the OSC receives its filings.
Mr. Proud in November submitted his third bid this year to buy D&D, offering $5.72 a share in cash and senior unsecured notes. His previous bids were for $10.25 a share this fall and for $20 in February. The prior bids were rebuffed by the board, as were attempts this year by Plantro, which owns 11 per cent of the stock, to name ex-chief operating officer Martha Vallance, and later Mr. Proud, as observers to the board, according to the ex-CEO’s counterclaim.
Mr. Proud also tried to privatize D&D in 2021, months after it went public at $7.50 a share, but the board rejected the $50.50-a-share management buyout bid.
Instead, the company gave him a rich pay package that incensed shareholders, led to the eventual exit of two directors, and sparked discontent among investors about D&D’s debt-fuelled acquisition binge. Activist Engine Capital LP tapped into that when it launched an ultimately successful campaign last year to overhaul the board.
Meanwhile, Mr. Proud’s brother, Tyler, one of the unhappy shareholders that supported Engine’s campaign, subsequently lost confidence in the new board. Last month, Tyler Proud revealed his own proposed dissident slate for this month’s annual meeting. He is one of five nominees that his private company, OneMove Capital, has proposed for D&D’s seven-member board.
News of the brothers’ rival efforts surfaced last month as three directors resigned, including Engine founder and D&D chairman Arnaud Ajdler, former interim CEO Sid Singh and Eric Shahinian, Tyler Proud’s nominee under a shareholder-rights agreement. Bay Street veteran Alan Hibben joined the board as chairman, as did Mr. Tsivin.
The latest developments add to what has been a tumultuous year for D&D. Last month, D&D reported disappointing preliminary unaudited results for last year and the first quarter.
S&P Global Ratings and Moody’s Ratings also cut their credit ratings on the company this fall. Among Mr. Proud’s criticisms in his countersuit are that the Engine board’s process to hire a new CEO dragged on and it rehired, then quickly fired, a former chief financial officer.
The stock has also crashed several times in recent weeks, including when CIBC Capital Markets backed out of leading a strategic review that could have resulted in the company’s sale. That process is supposed to kick off by year-end under the standstill agreement, reached after Matt Proud had launched his own activist campaign to shake up the board.