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Noah Zivitz

Managing Editor, BNN Bloomberg

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Shares in Dye & Durham Ltd. tumbled in early trading Wednesday as the Canadian consolidator of cloud-based software platforms spars with a regulator over one of its proposed takeovers.

The United Kingdom Competition & Markets Authority (CMA) spoke out against Dye & Durham’s takeover of TM Group (U.K.) Ltd. Wednesday, saying in a provisional review of the deal that it thinks it would cause a substantial lessening of competition. It also cast doubt on whether Dye & Durham will be able to hang on to the business.

“We have set out our initial view that the only effective way to address the competition issues we have identified would be for [Dye & Durham] to sell [TM Group] to a suitable buyer,” the U.K. watchdog said in its report. It invited feedback on that provisional finding to be submitted by June 1, and said the input would be considered ahead of a final decision that is expected by Aug. 16.

At its low Wednesday morning, Dye & Durham shares were down 19.6 per cent on a day when the broader tech sector was under pressure amid persistent investor unease about the outlook for interest rate hikes by central banks.

Dye & Durham pushed back against the CMA in a statement released two minutes after trading started on the Toronto Stock Exchange Wednesday.

“Dye & Durham disagrees with the CMA's provisional findings and is evaluating its potential options,” it said, adding that it “exercised every best effort to help the CMA with its review of the transaction, explain its benefits and offer a remedy proposal and is ready to continue to work collaboratively with the CMA going forward.”

Dye & Durham announced, and said it closed, the takeover of real estate software specialist TM Group, last July in a $156-million transaction. On Wednesday, Dye & Durham said the business had about £7.7 million ($12.3 million) in adjusted earnings before interest, taxes, and depreciation in the 12-month period that ended March 31, 2021.

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