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Dye & Durham Ltd. said Friday it has ended a strategic review process that was prompted by a management-led buyout offer last spring.

At the same time, the acquisitive Toronto-based legal software company announced it has negotiated a new loan agreement and the board has authorized a large stock option grant to chief executive officer Matthew Proud, part of the proposed buyout group.

The management group proposed a bid of $50.50 a share to the board in May, which valued Dye & Durham at $3.4-billion. The offer came just 10 months after the company listed on the Toronto Stock Exchange at $7.50 a share. That prompted the formation of a special committee of independent directors, advised by J.P. Morgan and Scotiabank.

In its final report, the committee recommended Dye & Durham “continue to pursue its current business strategy” by growing via acquisitions under Mr. Proud’s leadership, the company said Friday. With that, it said the committee had completed its work and would be dissolved.

Dye & Durham also said it has increased its credit facility to $1.8-billion, which will be used to repay amounts owing under its existing $700-million loan facility and to fund its continuing acquisition strategy.

Meanwhile, the company said it has granted Mr. Proud options to buy 6.85 million shares over the next five years, equal to 8.5 per cent of Dye & Durham’s fully diluted equity. Seventy per cent of the options will vest based on unspecified share price performance, while the balance will vest based on the company achieving corporate milestones that were also not disclosed by the company.

The board had previously granted Mr. Proud options last November to buy 2.34 million shares over five years, at a strike price of $21.31 apiece. With the stock closing at $39.38 Friday – down 5.8 per cent following the news – those previously granted options represented an in-the-money pretax gain of more than $42-million, if Mr. Proud were to exercise them at current levels.

Mr. Proud’s private investment vehicle, Plantro Ltd., has sold nearly 40 per cent of the 10.2 million shares it controlled prior to the IPO.

BMO Capital Markets analyst Thanos Moschopoulos said in a note Friday, “We expect that the noise with respect to the potential privatization being called off, coupled with potential shareholder dissatisfaction related to the large option grant, might weigh” on the stock’s valuation “in the near term.”

He added that with the new debt funding, he expects the company “will remain active” in pursuing acquisitions.

Dye & Durham operates in Canada, the United Kingdom, Ireland and Australia. The company pursues a strategy of buying up dominant providers of software and services used by legal professionals in those markets for such tasks as practice management and title searches, and jacking up prices in the face of little to no competition.

The aggressive strategy has drawn fire from customers, while Dye & Durham’s proposed acquisition of real estate due-diligence platform operator TM Group (UK) Ltd. is subject to an antitrust investigation by the U.K. Competition and Markets Authority.

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