(Bloomberg) — Shares of Dye & Durham Ltd. fell about 18%, the most in more than a year, after Canada’s Competition Bureau obtained a court order to investigate alleged anti-competitive behavior at the legal and business software company.
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The investigation focuses on Dye & Durham’s conveyancing software used in residential real estate transactions. The court order means that the competition watchdog can now force the company to submit documents, and that it has also invited market parties to submit information, according to a statement on Thursday.
Dye & Durham said in a separate statement that it is fully cooperating, that the investigation does not restrict its business activities and that the software industry is highly competitive and regularly disrupted.
The company also said it is concerned that the agency is acting on allegations from rivals “that have resisted productivity-enhancing innovation,” and that some of the regulator’s documents “discredit commercial relationships and standard software industry and data services business practices , such as subscriptions, inappropriately contextualize’. and contract terms, discounts and product suite offers.”
The investigation will complicate the board’s efforts to investigate takeover bids and other potential transactions. Thursday’s drop sent shares down to C$16.22 as of 1:11 p.m. in Toronto, wiping more than C$200 million from the company’s value and leaving it with a market capitalization of just under C$1.1 billion.
Dye & Durham is working with advisers on an investigation that could include a sale or other transactions, it said last month, confirming a Bloomberg report. The company has Goldman Sachs Group Inc. hired to generate interest from potential bidders, including US private equity and strategic candidates.
Dye & Durham is also being targeted by activist investor Engine Capital LP, which owns about 7.1% of the stock and this week nominated six candidates to its board in an effort to boost its valuation.
Keldon Bester, executive director of the Canadian Anti-Monopoly Project, said by email that the investigation is a good example of using competition law to tackle hidden practices that drive up the cost of living.
“Property conveyancing software rarely makes the headlines, but behavior in this market that reduces competition puts pressure on both legal professionals and their clients,” Bester said.
–With assistance from Geoffrey Morgan.
(Updates stock movement, adds quote from executive director of competition think tank.)
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