Dye & Durham Limited Contested Meeting: Engine Capital Case Study

In 2024, Engine Capital LP (“Engine”), an activist investment firm holding approximately 7.1% of Dye & Durham Limited’s (TSX: DND) shares, launched a transformative proxy contest to overhaul the company’s board of directors and address systemic issues at the company. Engine’s campaign was driven by mounting concerns over ineffective board oversight, undisciplined capital allocation, escalating leverage, strategic missteps, and egregious governance practices that had alienated shareholders and jeopardized the company’s long-term prospects.

To restore shareholder trust and unlock value, Engine proposed a slate of six highly qualified director nominees, with a clear vision to halt management’s reactionary strategic decisions, such as a full-company auction, and refocus Dye & Durham on sustainable growth, disciplined capital management, and operational efficiency. This plan resonated with shareholders frustrated by years of aggressive leverage and contentious board dynamics, including high-profile disputes among significant stakeholders.

Sodali & Co was retained as the strategic advisor and proxy solicitor for Engine, playing an instrumental role in orchestrating a seamless and multifaceted campaign. By uniting institutional and retail shareholders around Engine’s vision for change, Sodali & Co helped secure an overwhelming victory, with proxies representing over 64% of Dye & Durham’s outstanding shares submitted in majority favour of Engine’s BLUE proxy card. This unprecedented level of support led to the resignation of six incumbent directors and a sweeping boardroom transformation just days before the annual shareholder meeting.

The decisive outcome highlights Engine’s ability to unite institutional investors around a well-articulated plan for change and with Engine’s nominees in control, the company is poised for a fresh start, including implementing a CEO succession plan and accelerating deleveraging initiatives. This decisive outcome emphasizes Sodali & Co’s expertise in navigating complex shareholder activism scenarios and stresses its ability to help clients achieve meaningful and lasting governance reform.

Key Success Factors

1. Universal Proxy Utilization: Both parties utilized the universal proxy, allowing shareholders to mix and match candidates. Engine’s visual representation of its proxy card—putting forward six directors and leaving the seventh seat to shareholder discretion—underscored its commitment to shareholder choice. This approach, coupled with proxy advisor recommendations favouring Engine’s card, significantly influenced the voting process.
2. Overcoming Communication Challenges Amid Canada’s Postal Strike: The postal strike presented unique obstacles for shareholder communication. Sodali & Co implemented a multi-channel communication strategy, leveraging FedEx for document delivery, call and email campaigns, and cost-effective stratification measures. Additionally, a dedicated dissident website served as a centralized hub for shareholders to access information, campaign updates and most importantly vote their BLUE  proxy in support of meaningful change and improved shareholder wealth.
3. Aggressive Institutional and Retail Solicitation Campaign: Sodali & Co executed an aggressive institutional and retail solicitation campaign, effectively imparting Engine’s messaging and working closely with shareholders to ensure their votes were submitted on the blue proxy card. This effort began with a robust ownership intelligence initiative, where Sodali & Co identified institutions and retail investors in Dye & Durham’s stock and analyzed record date ownership despite dated filings. This foundational work enabled targeted engagement, ensuring that key shareholder groups were informed and mobilized. This strategy was instrumental in galvanizing support across diverse shareholder segments.
4. Meetings with Proxy Advisors: Strategic discussions with ISS and Glass Lewis were meticulously timed to optimize influence. Sodali & Co, along with our team of client advisors, orchestrated detailed presentations that effectively outlined Engine’s vision, showcasing its robust business plan while debunking misinformation propagated by management in a fragile market environment. These sessions were pivotal in shaping the narrative, ensuring it resonated with both proxy advisors. The culmination of these efforts was the timely release of favourable reports from ISS and Glass Lewis, amplifying institutional shareholder support for Engine’s case.
5. Proxy Advisor Endorsements: Achieving majority control of a board is a challenging objective, especially in the eyes of proxy advisors. Engine’s sophisticated business plan was pivotal. By addressing value creation and management transition plans with precision, Engine secured positive endorsements from ISS and Glass Lewis. These endorsements provided critical momentum, particularly among institutional shareholders, who formed the backbone of Engine’s support.
6. Engaging Dye & Durham’s Employees: Effective communication with employees was crucial to counter potential backlash. Engine pre-emptively addressed management’s rebuttal by providing clear, consistent messaging about the campaign’s goals and the anticipated benefits of the proposed board changes via press release. This mitigated resistance and fostered understanding among the workforce.
7. Virtual Meeting Protocol Logistics: The shift to a virtual meeting format introduced logistical complexities. Sodali & Co. ensured seamless execution by addressing ballot handling, facilitating shareholder questions, and managing meeting protocols with opposing counsel and proxy solicitation agent. These efforts underscored the importance of engaging solicitors early to navigate the various technical meeting challenges.
8. Deposits and Press Releases: The announcement of over 64% shareholder support via Engine’s blue proxy card was a turning point. The accompanying press release proposed by Sodali & Co exerted immense pressure on Dye & Durham’s management, prompting board resignations and underscoring Engine’s momentum.
9. Board Resignation and Transition: The resignation of Dye & Durham’s entire board ahead of the annual meeting required meticulous planning. Sodali & Co. supported counsel in managing the logistics of transitioning control to the dissident slate, ensuring a seamless handover within the virtual meeting framework.

The successful overhaul of Dye & Durham’s board by Engine Capital exemplifies the transformative power of shareholder activism when paired with strategic advisory expertise. Sodali & Co played a pivotal role in navigating the campaign’s complexities, from securing positive proxy advisor endorsements to overcoming logistical challenges and implementing cutting-edge ownership intelligence strategies. This case highlights the potential challenges issuers face when a dissident engages and underscores the value of a well-executed strategy in achieving governance reform. For legal professionals, hedge funds, activists, and issuers, this case serves as a compelling reminder of the dynamic landscape of shareholder activism. It illustrates the critical importance of preparedness, adaptability, and enlisting the right advisory partner[s] to prevail in high-stakes proxy contests. Sodali & Co extends our congratulations to Engine Capital on their resounding win and the trust they placed in our team to help drive this pivotal change.