1 week Ago
Controversial technology entrepreneur Matthew Proud has been accused by Information Services Corp. ISC-T of making an “abusive and coercive” mini-tender offer for the company’s stock. Last Wednesday Mr.
Proud’s private holding company, Plantro Ltd., announced an all-cash tender bid for up to 15 per cent of the Class A shares of Regina-based ISC, or 2,777,342 shares for $27.25 each, a 10-per-cent premium to the last closing price.
The offer comes weeks after Plantro submitted an unsolicited bid to buy Dye & Durham Ltd. DND-T for $20 per share. D&D said in February the bid lacked financing details and said the company was “not in discussions with any party, nor is there any agreement, understanding or arrangement with respect to any transaction.
” D&D stock has since sold off as part of the broader market rout, closing Monday at $8.37 a share. Mr.
Proud quit as D&D chief executive last fall in exchange for $10-million in severance as a proxy fight intensified for control of the board. A dissident slate of directors prevailed in December. Plantro has since sold more than $55-million worth of D&D stock.
It still holds 7.3 million shares. ISC provides registry and information management services for public data and records.
It once owned 30 per cent of D&D, but sold the stake back to the company in 2017 after D&D bought ISC competitor OnCorp Direct Inc. A Saskatchewan crown agency owns 29.3 per cent of ISC’s shares, while CI Investments and QV Investors Inc.
hold 13.2 per cent and 12 per cent, respectively. Plantro is not bidding for shares owned by the province.
Plantro said it unsuccessfully tried to open discussions with ISC’s board and management on board renewal “and a potential strategic investment.” It believes ISC “enjoys a durable competitive moat around its core offerings” and benefits from healthy cash flow and a strong balance sheet, though its stock is “highly illiquid.” ISC last month said it collected $62.
2-million in fourth-quarter revenues, and generated $22.3-million in operating cash flows and $5.3-million in net income.
In a release Sunday, ISC said shareholders should reject Plantro’s “coercive mini-tender offer,” labelling it an aggressive and “opportunistic backdoor attempt to take effective control of the board during a time of heightened market volatility.” ISC said the bid would enable Plantro to secure “proxy control over the majority of the company without paying shareholders a control premium” or submitting a formal takeover bid, which would be subject to more stringent securities rules. ISC also disputed Plantro’s claim that it attempted to engage constructively with the board.
According to Plantro’s offer – which expires 5 p.m. this Friday – shareholders who deposit any of their shares would be providing the rights associated with all shares held under the same account, even those that aren’t deposited.
Plantro would then gain rights to vote those shares “at any meeting” as long as the offer remains open, even if it doesn’t buy them. For example, an investor with 1,000 ISC shares in an account who tenders 400 shares would be surrendering voting rights to all 1,000, even if Plantro ultimately only buys 100. Once Plantro takes up the shares, it could hold the rights for an extended period before actually paying for or releasing them.
Toronto corporate lawyer Philip Anisman said the offer “imposes maximum pressure on shareholders to sell” while leaving “maximum flexibility to the bidder. It would appear to be a high-pressure campaign to elect a substantial number of directors,” he said, noting Plantro’s deadline comes three days before the deadline for submitting director nominations for ISC’s May 13 annual meeting. ISC said in its release, “The sequence of events suggests a premeditated effort to destabilize ISC’s governance by acquiring voting power without paying for control.
To allow such an outcome would undermine market fairness, corporate accountability and investor protection.” It also took a shot at Mr. Proud’s track record while leading D&D.
Mr. Proud said in a text that “Plantro is disappointed that the board would attack anyone interested in investing in the company. Participation in the tender offer is entirely optional, and an opportunity for shareholders, if they choose, to get some liquidity for their stock.
” Similar mini-tender offers are rare and have not ended well for the bidder. In August, 2019, a Quebec financial markets administrative tribunal cease-traded an offer by Mach Group Inc. to buy 19.
5 per cent of Transat A.T. Inc.
’s B shares, determining the offer was abusive to shareholders..
