(Bloomberg) -- Dye & Durham Ltd. needs a new board and management team instead of a sale, says one of its shareholders.
Engine Capital LP, which says it owns about 7.1% of Dye & Durham’s shares, said the company’s board “appears to have now authorized a reactionary sale process at the worst possible time and doubled down on its missteps.” Last week, Engine said it’s still planning to pursue boardroom changes and will introduce its own slate of director candidates at the annual meeting in December.
Dye & Durham, which provides software and services to the legal and banking sectors, is working with advisers on a strategic review that may include a sale, merger or other transactions, the Toronto-based company said Tuesday, confirming an earlier report from Bloomberg News. There’s no guarantee it will get a deal, the company cautioned.
“The board has a fiduciary obligation to consider all potential paths to enhance shareholder value, while remaining focused on the execution of the company’s standalone strategy,” a spokesperson for Dye & Durham told Bloomberg, adding that Engine has no reasonable basis for its “disingenuous demands” and “misleading claims.”
In a takeover, the stock could be worth considerably more than its Wednesday closing price of C$19.25, given its earnings power and growing recurring revenue mix, according to BMO analyst Thanos Moschopoulos, who raised his target price to C$23 a share. A takeout price for the company, should a formal offer materialize, could range from C$25 to C$30 per share, Moschopoulos added.
Dye & Durham went on an acquisition spree after an initial public offering in 2020. But it has been forced to reconsider its growth strategy because of concerns about high leverage. The company had long-term debt of more than C$1.5 billion ($1.1 billion) as of June 30.
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