Canadian building-interior maker DIRTT drops bid to sell itself (updated)

DIRTT Environmental Solutions

02/08/2018 04:02

(Adds confirmation from DIRTT)
    By Greg Roumeliotis and Liana B. Baker
    Aug 1 (Reuters) - DIRTT Environmental Solutions Ltd  DRT.TO 
confirmed on Wednesday it was no longer in deal talks after
Reuters reported that the Canadian building-interior
manufacturer had abandoned an effort to sell itself.
    Private equity firms seeking to raise debt financing for the
acquisition of DIRTT struggled to convince banks to finance a
business that is vulnerable to changes in the cyclical
construction industry, according to people familiar with the
matter. 
    DIRTT said in a statement following the Reuters story that
its board of directors had formed a special committee and hired
financial and legal advisors to consider "strategic
alternatives" following an "inbound non-binding transaction
proposal" earlier this year.
    "It was determined that no strategic transaction should be
pursued at the present time," said DIRTT, whose name is an
acronym for "doing it right this time." 
    Founded in 2004, the Calgary, Alberta-based company has a
three-dimensional design platform that helps customers make
custom designs. It went public in 2013 on the Toronto Stock
Exchange. 
    DIRTT's custom prefabricated installations can be found in
the headquarters of companies like Apple Inc  AAPL.O  and
Alphabet Inc's  GOOGL.O  Google. 
    A U.S. Commerce Department report showed construction
spending unexpectedly fell in March as a slump in homebuilding
and renovations led to the biggest drop in investment in private
construction projects in more than seven years.
    DIRTT also entertained offers for a private investment in
public equity (PIPE) transaction, that would give a private
equity firm a minority stake in the company but choose not to
pursue one in the end, according to the sources.
    DIRTT, which has a market capitalization of C$553.38 
($425.45), had also been a target of U.S.-based activist
investor Iron Compass, that threatened a proxy contest earlier
this year. 
    The company announced a settlement with Iron Compass in
April, and agreed to add two board directors recommended by the
activist hedge fund. A representative for Iron Compass could not
be reached for comment. 
    In January, the company's co-founder Mogens Smed stepped
aside as chief executive and was named executive chairman.
DIRTT's board formed a special committee to explore a sale, as
Smed wanted to participate in the deal by partnering with a
potential acquirer, according to the sources.
    In the first quarter of the year through March 31, the
company's revenue rose 24.1 percent to C$80.7 million compared
to C$65 million a year earlier. Its net income rose to C$3.56
million, after a net loss of C$1.3 million a year earlier. 

 (Reporting by Greg Roumeliotis and Liana B. Baker in New York;
Editing by Bernadette Baum and Stephen Coates)
 ((liana.baker@thomsonreuters.com; 6462234850 @lianabaker;
Reuters Messaging: liana.baker@thomsonreuters.com@reuters.net))