Perennially embattled Dye & Durham Ltd. DND-T has been beset by a trio of fresh crises.
On Wednesday, the holding company of former D&D chairman Tyler Proud, OneMove Capital Ltd., called for current chair Arnaud Ajdler, who is the founder of New York hedge fund Engine Capital LP, to step down immediately from the board. In a press release, Mr. Proud accused D&D’s current chair of overseeing “nine months of accelerating decline.”
Once targeted by activist investors, Matt Proud is now a formidable shareholder gadfly himself
Mr. Proud also called for an immediate update on D&D’s “true financial position” after the Toronto real estate and business services software company said on Sept. 15 it wouldn’t be able to file its financial statements for its fiscal year that ended June 30 by next Monday’s deadline.
The company will be in a technical default on its senior debt unless it gets a waiver from its lenders. That news caused a steep sell-off in the stock.
“OneMove is fed up,” Mr. Proud said in an e-mail to The Globe and Mail. “Engine promised a strategic plan for the company last December that we supported. Engine has not delivered on anything in that plan – all they have done is destroy value.”
Mr. Ajdler did not respond to requests for comment.
In the press release, Mr. Proud accused the company of leaving shareholders in the dark and pressed for an update on a strategic review announced in July. Two sources familiar with the matter said the company has not yet hired a banker to run the process. The Globe is not identifying the sources as they are not authorized to discuss the matter.
“The company’s soaring leverage and strained liquidity leaves us deeply concerned that the board will undertake a rushed and flawed asset sale to distract shareholders,” Mr. Proud, who was an observer on the board, said in the release.
CEO and company facing New York lawsuit
Meanwhile, D&D’s newly hired chief executive officer, George Tsivin, has been sued by his former employer Relx PLC in New York Supreme Court.
Relx alleges in the suit that Mr. Tsivin, who was previously a senior vice-president, violated his 90-day notice requirement and 12-month non-compete agreement by accepting the job at D&D, a competitor in the legal software space. The suit was filed last month against Mr. Tsivin and Dye & Durham. The allegations have not been tested in court.
The public move by OneMove is a significant blow as Mr. Proud was one of a key group of shareholders that supported a successful activist campaign led by Mr. Ajdler’s Engine Capital LP last year against D&D.
The campaign led to the departure of Mr. Proud’s brother, Matt Proud, as CEO last December, and a complete replacement of the board with Engine’s hand-picked slate. The Proud brothers previously had a falling out that has resulted in a prolonged behind-the-scenes battle.
D&D said this month it wouldn’t be able to file its annual results on time after the Ontario Securities Commission raised questions about its financial statements related to goodwill impairment testing and purchase accounting disclosures.
D&D said it didn’t expect any ensuing changes to affect prior results. BMO Capital Markets analyst Thanos Moschopoulos said in a note earlier this month that he didn’t expect the development to affect his forecasts, adding “we presume that DND will be filing its financials in October.”
OneMove called on D&D to confirm whether it can meet its near-term debt obligations, and asked it to provide an outlook on the current quarter, as well as to disclose if getting a waiver will restore D&D’s access to its revolving credit facility.
The public dispute with Tyler Proud comes two months after D&D made peace with Matt Proud, who had launched his own activist campaign against the company through his private holding company Plantro Ltd. after his departure.
Under the standstill agreement, the company appointed Plantro’s nominee David Danziger to the board and agreed to put itself up for sale for the second time in a year. That prompted David Barr, CEO of D&D shareholder PenderFund Capital Management Ltd., to remark in a previous interview with The Globe: “I think we’re now seeing the final season of my favourite daytime soap opera.”
Dye & Durham’s tumultuous history
D&D has been troubled by turmoil for most of its five years as a public company.
Widespread investor discontent dogged D&D starting in 2021, as shareholders expressed a litany of misgivings about its leadership, direction, debt-fuelled acquisition spree and value creation plans.
Customers raged against steep price hikes for its products and the Competition Bureau launched a continuing investigation into alleged trade restricting practices. Britain’s competition regulator forced the company to divest an acquisition there.
Then in February, 2024, Engine launched an activist campaign, pressing for board changes. Engine ultimately succeeded as other disgruntled shareholders supported its efforts.
The Engine-led board promised to pause deal-making, reduce debt, improve culture and discipline, and build customer loyalty and shareholder value. But the campaign to hire a CEO dragged on as D&D appointed two interim leaders from its board. Its results disappointed and the stock slumped.
D&D was subject to whistle-blower complaints, and Plantro accused Mr. Ajdler and another director of misconduct, alleging they tried to force former chief financial officer Frank de Lisio to adopt aggressive accounting practices that inflated earnings. D&D called those accusations unsubstantiated.
D&D also rehired its former CFO Avjit Kamboj in early June, only to fire him less than two months later without cause. Sources at the time said his departure was because he and the new CEO didn’t get along.
Matt Proud, meanwhile, has turned into an activist investor in his own right, pressing for changes through Plantro at TSX-listed Calian Group Ltd. and Information Services Corp. Tyler Proud’s OneMove also this month launched a public campaign against TSX-listed Sylogist Ltd., calling for a special meeting of shareholders to vote on three of its director nominees.