(Bloomberg) — Canadian software firm Dye & Durham Ltd. struck an agreement to buy a payments business from Telus Corp. in the company’s first deal since a proposed management buyout was scrapped in October.
The C$500 million ($391 million) acquisition of Telus Financial Solutions will give Dye & Durham control of software that handles about 140 million bill and tax payments a year. The Toronto-based company is also buying technology that connects Canadian banks and other lenders to law firms when a new mortgage is being arranged or an existing one is discharged.
Dye & Durham jumped 9.3% to C$42.25 in Toronto, its largest gain since May 31, when the company disclosed that a management group had proposed a takeover.
Matt Proud, Dye & Durham’s chief executive officer, said the company plans to use the Telus payments infrastructure to help move money on residential real estate deals. Currently, it’s only being used to help process home sales in one Canadian province: Quebec. Expanding that across the country will make real estate transactions more efficient, he said, by cutting down on paperwork.
On most housing transactions, “you’re talking stacks of paper, many many checks cut on every transaction and couriered. It’s prone to fraud and it’s highly inefficient,” Proud said in an interview. “Putting it together with what we do, we’re really in the future going to drive a ton of value for our customers.”
Dye & Durham went public in July 2020 at C$7.50 a share and quickly became one of Canada’s standout initial public offerings of the year, rising above C$50 by year-end. The company sells software and databases to the legal industry to help lawyers complete real estate transactions, corporate filings, wills and estates and other services.
When the stock declined earlier this year, a group of executives including Proud proposed taking the company private again for C$50.50 a share. But the idea immediately ran into opposition from one of the largest shareholders, Mawer Investment Management Ltd., which joined forces with other investors to quash the idea.
“We went through a very robust process,” Proud said of the board’s deliberations. “At the end of the day, though, a large number of shareholders didn’t want to sell at that price.”
Dye & Durham has been criticized by some members of the legal profession for imposing large price increases on software used to help process home purchases and financings. The company recently told about 1,000 firms in British Columbia it would be raising the fees on one particular software product by as much as 563%, according to a report in the Globe and Mail newspaper.
Proud said the higher prices reflect the value of the efficiency that law firms get from using Dye & Durham’s products. “We continue to — as this acquisition demonstrates — invest significantly in improving our customers’ experience and their ability to do their job better,” he said.
Canadian Imperial Bank of Commerce was the financial adviser to Dye & Durham on the Telus deal and Goodmans LLP was the legal adviser.
“We believe the payments platform marks an expansion into new verticals for DND,” Raymond James analyst Stephen Boland said in a note to clients. “We believe the fintech business represents a significant market opportunity given the company’s previous experience in scaling and developing complex technology solutions.”
(Updates with share price change in third paragraph)
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