Canadian software company Dye & Durham Ltd. is considering a privatization after a group of investors, led by its management team, offered to buy the company less than a year after it listed on the Toronto Stock Exchange.
Dye & Durham, which provides software for legal and business professionals, started trading at $7.50 a share on the TSX last July and watched its stock soar soon after, ultimately climbing above $52 in February. During the rise, two companies controlledby chief executive officer Matthew Proudand his brother Tyler Proud, who used tobe board chairman, have sold $164-millionworth of Dye & Durham stock.
Lately, however, the shares have settled into a new price range after tumbling 22 per cent amid a growth-stock sell-off across North America. Early Monday the investor group announced it is willing to pay $50.50 per Dye & Durham share, which is a 23-per-cent premium to Friday’s market close. The company has 68 million shares outstanding, according to Refinitiv, valuing the management buyout at $3.4-billion.
The investor group’s offer is only an indication of interest, and therefore is not a binding bid that would force it into a deal if Dye & Durham accepted. The company’s board of directors said it is launching a strategic review to consider its range of options.
Dye & Durham’s shares climbed 17 per cent in Monday trading to close at $48.24 apiece.
Despite the large stock market gains since its initial public offering, Dye & Durham has been losing money. Instead of focusing on short-term profits, management is seeking growth-by-acquisition, which tends to involve paying healthy premiums for its targets. Earlier this month the company reported a $47.1-million loss over the nine months that ended March 31.
Many of these acquisitions have been funded by selling new shares as the stock price rose over time. Most recently, Toronto-based Dye & Durham issued $200-million worth of shares for $50.50 apiece in February, which is the same price the management group has now bid for the entire company.
Lately Dye & Durham has focused on expanding in Australia, where it has pursued deals such as the $166-million acquisition of GlobalX Information Pty Ltd. Dye & Durham was also reported to be in the running for Property Exchange Australia, or PEXA, which handles electronic settlements of real estate transactions, alongside rival bidder KKR & Co Inc., which bid $3.1-billion Australian ($2.88-billion). PEXA recently announced it will pursue an initial public offering instead.
Real estate has been a hot sector for Dye & Durham lately and its growth has drawn scrutiny from some in the industry. In some cases, a company it acquires has no major rivals – and Dye & Durham raises prices once it takes over.
Late last year the company acquired DoProcess, which is Canada’s largest provider of real estate practice-management software. A few months later, in early January, it informed real estate lawyers across Ontario it would raise prices on The Conveyancer (which Dye & Durham has renamed Unity), a DoProcess program law firms use to process transactions, by more than 400 per cent – to $129 a deal, from $25.
Dye & Durham declined to comment for this story.
Dye & Durham initially tried to go public in the fall of 2018 but scrapped the deal because of choppy market conditions. Investors had also been cool to the fact more than half of the $125-million in expected proceeds would have gone to existing shareholders, mainly CEO Matthew Proud and his brother Tyler, the then-chairman.
In the aftermath Dye & Durham tried to address investor concerns by making changes that included Tyler Proud giving up the chairman role to lead director Brian Derksen, former deputy CEO of Deloitte LLP.
With files from Sean Silcoff and Jaren Kerr
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.