A major shareholder is proposing to take Toronto-based legal software company Dye & Durham DND-T private, a deal that would pay a significant premium to the company’s closing price last week.
Plantro Ltd., controlled by former Dye & Durham chief executive officer Matthew Proud, says it’s prepared to offer $20 a share, which would be 70 per cent higher than the company’s closing price of $11.75 on Friday.
However, CIBC analyst Scott Fletcher and associate Erin Kyle pointed out in a note to shareholders Monday evening that the potential offer is only 0.5 per cent higher than Dye & Durham’s closing price on Dec. 17, the day a proxy battle began at the company.
Dye & Durham’s shares shot up by about 25 per cent on Monday after news of the proposal was reported by Bloomberg.
In a letter outlining the proposal, addressed to Dye and Durham’s board of directors, Plantro director Amanda J. Lashley makes it clear the shareholder’s intentions are simply to communicate its “non-binding interest in a possible transaction.”
Dye & Durham days earlier had again shook up its board, after the election of a board slate put forward by its main dissident shareholder, Engine Capital LP, in December. A batch of departures followed the shareholder vote on the overhaul that month, including chief operating officer Martha Vallance, the company’s global vice-president of operations and marketing, and the vice-president in charge of Canadian sales.
Dye & Durham’s fiscal second-quarter results came in below expectations earlier this month, owing to one-off costs related to the proxy fight, including $10.8-million in “CEO separation costs” related to Mr. Proud’s departure.
A list of grievances with the company are outlined in Plantro’s letter to the board, including the lack of a new CEO being appointed within a promised timeline of eight weeks and “enormous shareholder losses.”
Ms. Lashley wrote in the letter that, “at this point, the best path to deliver value to existing shareholders is a full sale of the business and for the Company to undertake its next phase of growth in the private market.”
If Dye & Durham accepts its proposal, Plantro said it will work with the company to settle on definitive agreements within four weeks.
But in the absence of concrete details on deal terms and financing, Mr. Fletcher and Ms. Kyle at CIBC say the sale of Dye & Durham at $20 a share seems unlikely, given that previous offers in a similar range have been rejected by shareholders.