Dye & Durham Corp. has another unhappy investor pushing for changes to its board and strategic direction: the chief executive officer’s brother.
The Toronto legal software company said Tuesday that its board had rejected an “invalid” proposal by OneMove Capital Ltd. to remove its long-time nominee, Edward Prittie, as a D&D director at a special shareholder meeting on Aug. 20.
OneMove is the holding company of former D&D chair Tyler Proud, the younger brother of D&D CEO and director Matthew Proud. The CEO’s holding company, Plantro Ltd., controls 16.2 per cent of the stock; OneMove has 8.4 per cent.
Under a shareholder agreement between D&D, OneMove and Plantro dating to when the company went public, OneMove has the right to designate a nominee to its board so long as it owns 5 per cent of the stock. Until now, OneMove’s nominee has been Mr. Prittie, who leads a document storage business in sub-Saharan Africa.
But under OneMove’s proposal, sent to the board on June 19, Mr. Prittie would be replaced by New York alternative asset manager Eric Shahinian on the slate at the Aug. 20 meeting. D&D has called that meeting at the behest of activist hedge funds Engine Capital LP and Blacksheep Fund Management, who are pushing for governance and strategy changes at the company.
D&D rejected the proposal to remove Mr. Prittie, stating in a release that the board believes it “is an attempt by OneMove to redress a personal grievance against” its former nominee for refusing to comply with its demands. D&D added he has “served with distinction and acted in the best interests of the company.”
At the same time, DND said it “currently intends to honour its obligations” under the shareholder agreement and nominate Mr. Shahinian.
The younger Mr. Proud’s Barbados-based holding company responded to the confusing situation, saying in its own release it “rejects this nakedly tactical attempt to disenfranchise OneMove’s statutory rights as a shareholder and any further attempt to intimidate it.
“OneMove will vote its shares as it sees fit, as it has always done.”
The company said it intends to replace Mr. Prittie “because of the ongoing governance issues and performance of the business over the last 24 months” after Tyler Proud unsuccessfully tried to engage with the board.
A OneMove representative said in an e-mailed message that the dispute is a business matter between the younger Mr. Proud’s holding company and the D&D board, and not related to any personal relationship between individuals.
Engine has criticized D&D and its board for an alleged pattern of poor strategic decision-making including misallocation of capital and mismanagement of a convertible debt refinancing. D&D has pursued the wrong target by aiming to increase operating earnings to $1-billion a year, which incentivizes acquisitions even if they don’t create shareholder value, Engine believes.
The net result, Engine managing partner Arnaud Ajdler, stated in an April letter to shareholders, has been “long-term underperformance” by D&D. He is calling on the board to incentivize management to instead optimize return on capital, increase revenues from existing businesses and take a more measured, disciplined approach to deals.
D&D has pushed back, stating Engine displayed “a stunning lack of understanding of the key value drivers” of its business and grossly mischaracterizing its track record. It has accused Engine of breaching Canadian securities laws and threatened legal retaliation.
Engine has requested the removal of three D&D directors – Brian Derksen, Colleen Moorehead and Leslie O’Donoghue – at the meeting and proposed three of its own nominees. D&D has said Mr. Derksen would not stand for re-election. Blacksheep has told D&D it may nominate its chief investment officer.
The Proud brothers took over TSX Venture-listed OneMove Technologies in 2013 and picked up a string of legal software companies, including D&D, whose origins date to the 1800s. D&D tried to go public in 2018 but pulled the offering because of choppy markets and investor concerns.
The company addressed those concerns, in part by the younger Mr. Proud leaving the board before it went public in July, 2020. That month, the brothers teamed up in an unsuccessful bid to buy Torstar Corp.
D&D has been a highly acquisitive, debt-fuelled company specializing in buying legal software providers in Canada and subsequently hiking fees for such services as property transfers. It has also pursued acquisitions in Britain and Australia.
Last year, D&D was forced by Britain’s competition regulator to divest a company over concerns the purchase would substantially reduce competition among suppliers of software to handle real estate property search reports.
More recently, investors have been troubled by D&D’s high debt levels. The company has taken steps to lighten its financial burden by reducing capital and operating costs, launching a strategic review of non-core assets and, in April, completed a $905-million refinancing of its debt that pushed out key repayment dates by several years and cut annual interest costs by $20-million.
But its stock, which collapsed amid the tech sell-off starting in late 2021, has languished ever since. It hit an all-time low of $7.46 last October, slightly below its IPO price. Despite spiking to above $17 briefly on news of the refinancing, it closed Tuesday at $12.65 – less than one-quarter its 2021 peak level.