Legal software provider Dye & Durham Corp. has increased the size of its planned initial public offering by 50 per cent amid strong demand from investors keen to buy into the soaring Canadian technology sector.
The acquisitive Toronto company now plans to sell $150-million of stock on the Toronto Stock Exchange, offering between 20 million and 21.43 million shares at between $7 and $7.50 apiece, according to a regulatory filing. Of the gross proceeds raised, $127.5-million will go to the company. Investment vehicles related to CEO Matthew Proud and his brother, former chairman and outgoing director Tyler Proud, are also selling $10-million worth of stock held by personal holding companies in the offering. Another long-time shareholder, Wahi Investments, is selling $2.5-million worth of stock.
The total has grown from the original plan, filed in late June with regulators, for D&D to sell $100-million in the IPO, with $90-million going to the company and $10-million going to an investment entity affiliated with Tyler Proud, Seastone Invest Ltd.
It’s been a busy week for the Proud brothers. They are also part of a group trying to buy Torstar Corp., along with investment banker Neil Selfe and former Ontario finance minister Greg Sorbara. Their 72-cent-per-share bid for the publisher of the Toronto Star is higher than the 63-cent bid from Toronto business leaders Jordan Bitove and Paul Rivett that the company agreed to in May and “may reasonably be expected to constitute or lead to a ‘superior proposal,‘” Torstar said Thursday. The company’s board and a trust that represents the five families who control Torstar are now weighing the two offers. It is believed Tyler Proud and Mr. Selfe are leading the Torstar bid, as Matthew Proud has been focused on the D&D IPO.
Sources familiar with the D&D IPO, led by underwriters Canaccord Genuity, Scotia Capital Inc., BMO Nesbitt Burns and Infor Financial Group Inc. (where Mr. Selfe is CEO), say the offering was upsized after investors placed orders for more than 11 times the available stock, with much higher demand from institutional investors than other recent Canadian tech IPOs. The sources are not being identified by The Globe and Mail as they are not authorized to speak publicly on the matter. The underwriters have the option to buy another three million shares at the offer price.
D&D had intended to go public in the fall of 2018 but bailed due to choppy market conditions. Investors were also cool to the fact that more than half of the $125-million in proceeds would have gone to existing shareholders, mainly the Proud brothers. (Their share in the new IPO is 13 per cent.)
The company tried to address investor concerns as it prepared to retest the markets. Tyler Proud gave up the chairman role to lead director Brian Derksen, a former deputy CEO of Deloitte LLP. D&D also negotiated a $200-million credit agreement, using $50-million of the proceeds to pay a dividend to shareholders. It made three acquisitions in 2019 for $60-million.
D&D had eyed a $150-million IPO for early spring before the pandemic hit. That prompted the company to issue layoffs and temporarily cut employee salaries by 20 per cent. But with a strong rebound among technology stocks – Canadian-listed Shopify Inc., Kinaxis, Enghouse Systems Ltd., Real Matters Inc. and Docebo Inc. recently hit record highs – and steady performance by D&D, the market looked favourable for a renewed IPO. In March, D&D hired Jae Cornelssen, a former mergers and acquisitions adviser with KPMG Corporate Finance, as chief financial officer.
The company said in its prospectus that it earned pro-forma revenue of $60-million in the nine months ended March 31, up from $38.1-million in the same period last year, and posted adjusted operating earnings of $31.4-million and a net loss of $7.4-million. It has 144 full-time employees and is targeting revenue of about $75-million for the year ending June 30, with adjusted operating earnings of about $40-million.
It plans to pay an as-yet unspecified dividend and will use most of the IPO proceeds to repay debt.
Matthew Proud declined to comment on the offering Friday.