A release to the market on July 30, 2015 showed that DHR realized that they will not be able to disrupt Caldwell Partners:
"Caldwell Partners … today announced that its Chairman, G. Edmund King, and the Chairman of DHR International (“DHR”), David Hoffmann, had concluded, on an amicable conference call, that Caldwell Partners and DHR would cease further communications regarding an acquisition transaction by DHR for Caldwell Partners at the present time. As part of the conversation, Mr. Hoffmann and Mr. King agreed that DHR would dispose of its approximately 5.6% of the shares of Caldwell Partners and, in order to avoid any overhang of these shares in the market, Caldwell Partners agreed to purchase such shares at a price of C$1.40 per share. Messrs. King and Hoffmann also agreed to a two-year mutual non-solicitation understanding, pursuant to which neither would solicit partners or search consultants of the other, but may hire partners and search consultants who leave employment or who initiate discussions with the other party (with prior discussions being grandfathered), and a two-year standstill pursuant to which DHR and its affiliates would not acquire shares of Caldwell Partners. The agreements are subject to the negotiation and execution of mutually acceptable definitive documentation."Laughably, David Hoffmann was then quoted by his PR aparchicks, Hunt Scanlon as saying:
"DHR does not want to be, nor ever wanted to be, involved in a hostile takeover. We want to wear a white hat, as we always have."Not sure those at CTPartners would believe this. And of course, Hunt Scanlon have the inside word from DHR:
"David Hoffmann has not backed off his belief that these two search firms should join forces to maximize their potential as a combined force in the recruiting industry. I would not be at all surprised to see another combination attempt in two years time."This all followed the Chairman of Caldwell Partners writing a further letter to DHR International on July 28, 2015:
"In your letter, you make several accusations regarding the Board's fiduciary duties and enumerate a number of requests regarding the Board's review process. Rest assured that the Caldwell Partners Board is well aware of its fiduciary duties and is confident that it is fully compliant. Accordingly, the Board does not intend to respond to you on any of these matters."
"DHR's interest in Caldwell Partners – both as a destabilizer and as a potential acquirer – is at odds with the interest of our corporation and its various constituencies, including our shareholders. Indeed it is difficult, if not impossible, to treat your recent subversive recruiting activities as anything but disruptive attempts that could adversely affect shareholder value."
"What is further frustrating is that you are ignoring the impact that your continued advances could cause on the business you wish to acquire. Our Board was copied on a letter sent directly to you on July 16, 2015, from and signed by each and every one of our 37 partners. The letter states unequivocally that none of the 37 partners wish to work for an entity controlled by DHR, and that any transaction that accomplishes this would be "an empty one void of significant producers and shareholder value will be destroyed". It is my understanding that the letter was written, and consensus on it obtained, exclusively from the partners themselves. I am attaching it again for your reference."
"It is the job of our Board of Directors to do what is in the best interest of the corporation and to protect and enhance the investment of all our shareholders. As such, it is incumbent upon us to decline any further invitation to meet with you regarding an acquisition of Caldwell Partners by DHR."Caldwell Partners continues to be in play, with around 300,000 shares trading on July 22 and 23. Speculation is that this is DHR building its stake, with a greater volume to that acquired by DHR on July 13. We posted on July 23 that we expected Hunt Scanlon's lead story (paid advertisement?) in its 'Daily Newswire' to once again focus on this story and of course it did.
On July 24, DHR responded to Caldwell's July 17 letter, but have said nothing new. Perhaps the most interesting part of DHR's latest letter is their tone of indignation that Caldwell are not rolling over.
On July 17, Caldwell Partners issued another letter/press release reiterating they want to have nothing to do with DHR International:
"Our refusal to engage in further discussions with DHR was strongly validated by the events that were occurring prior to my July 14, 2015 letter. While you professed to me on our July 7, 2015 phone call that you would like to avoid a confrontation, we are aware of at least four attempts by DHR partners specifically stating they represented you to contact our partners in order to urge them to "jump ship" and join DHR prior to any transaction. We believe this was a clear attempt to undermine our business and depress our Company's share price."
"Simply put, and as they have expressed to you, our partners are not willing to be part of a firm controlled by DHR."
"Our Board of Directors has the responsibility to protect the investment of all our shareholders. As such, we will vigorously defend any further attempts by DHR to disrupt or undermine our business."Caldwell Partners' earlier press release said:
"The Caldwell Partners International Inc ... today announced that its Board of Directors, after consulting with its financial and legal advisors, has unanimously determined that pursuing discussions with DHR International, Inc. at this time is not in the best interest of the firm, its shareholders, partners, employees and clients."
"...our partners have expressed to us their significant concern and have made it clear that they would not be willing to be part of a firm controlled by DHR."This caused DHR's lawyers have written a heavy-handed letter back to the Chairman of Caldwell accusing the Caldwell Board of not fulfilling their duties as board members. Some would say this is laughable as DHR are hardly a bastion of ethical behaviour but at least DHR are not stupid enough to be publicly traded.
"The Caldwell Board’s determination is unsupported, unacceptable for a publicly traded company and violates the board members’ fiduciary duties to its shareholders."DHR have been spitting out press releases flagging their interest in Canadian listed Caldwell Partners.
"Global search firm DHR International announced today that it has increased its share holdings in Caldwell Partners International (TSX: CWL) to 1,141,000 common shares, representing approximately 5.36% of the common shares outstanding. DHR believes that it is now the third largest shareholder of Caldwell International. In addition, DHR announced that its Chairman, David Hoffmann, and Edmund King, Caldwell’s Chairman, had spoken recently concerning DHR International’s interest in the company. Mr. King advised Mr. Hoffmann he anticipated Caldwell’s board of directors would be meeting Thursday, July 9 to discuss DHR International’s interest."Actually, that press release, following one on July 2, suggested that DHR have increased their shares minimally from holding 5% to 5.36% of the outstanding shares. In other words, DHR are churning out press releases with little new information and trying to keep the pressure up. Curiously, the new press release talked about "July 9" as if it were in the future. That date was four days before the release came out.
Although DHR were trying to buy CTPartners Latin America, these offices did not join DHR but joined Caldwell Partners: see this press release. As pointed out by a reader of our web site, the press release is unusual in that it reveals the commercial terms including a poison pill. If DHR acquire Caldwell in the next two years, then the Latin American partners "have the right to terminate the alliance agreement and will be entitled to a dislocation and rebranding fee of $2.0 million".
This was a brilliant move by both the CTPartners Latin America partners and Caldwell as it effectively adds $2 million to the purchase price of Caldwell and - even if DHR buy Caldwell - they will have to pay this but still won't get the Latin America offices! Caldwell have also put in a similar poison pill provision to other CTPartners' consultants joining the firm. As one reader emailed us, "With no debt, and therefore no back door for DHR, DHR will find it very expensive taking over [Caldwell Partners]".
When did this begin? Shares in Caldwell initially spiked in late June, 2015. See Caldwell's initial press release:
"More than 500,000 shares of the company's common stock traded today, increasing the share price over 40% to $1.84 and spurring the trading halt."
"Caldwell Partners reports that is has no knowledge of any material change in the affairs of the company which should cause a change in its stock price and it is not aware of either the party or parties acquiring the shares, or the party or parties selling them, and therefore has no information to provide at this time."It was subsequently confirmed by Scott Scanlon,that DHR International were the acquirers of these shares, Scanlon originally posted the rumor and then confirmed it, as he has a privileged relationship with DHR. His latest post is clearly PR for DHR: as usual, former bankrupt, Scanlon, writes the article, quotes himself as an expert and refers to his ranking table. Do DHR pay for this?
"DHR International has confirmed that it purchased an aggregate of 1,032,00 shares of Canadian rival Caldwell Partners International last week on the open market of the Toronto Stock Exchange. The share purchase represents approximately five percent of Caldwell’s issued and outstanding common shares. DHR said in a call [to Scanlon?] this evening that it believes it is now Caldwell Partners' third largest shareholder."
"In recent weeks, Chicago-based DHR has been in communication with Caldwell’s management regarding a possible acquisition of the company. DHR said that it expects that any negotiated transaction would be priced at "a premium to the recent market price of Caldwell’s common shares," and that DHR would not require any external financing to complete a full share purchase of the company. To date, no agreement has been reached. According to DHR, it intends to continue exploring its interest in a negotiated transaction with Caldwell and that process is expected to last "at least another couple of weeks" as both companies take time to explore their options."But the Scanlon story was counter to a Caldwell Partners press release of the same day, where Caldwell said that "on the evening of July 1, 2015 it received a letter from David Hoffmann, Chairman of the Board of DHR International, Inc." and that "This is the first instance of communication from DHR International to the Board of Caldwell Partners, which was not in current discussions with DHR International regarding any proposed transaction." So who is telling the truth as to whether there have been discussions? Remember, DHR claim "in recent weeks, [they have] been in communication with Caldwell’s management regarding a possible acquisition of the company".
DHR's July 13 press release continues with a quote from David Hoffmann.
"David Hoffmann commented … "Caldwell would be a good strategic fit for both firms and we are anxious to continue our discussions…it’s a great firm with great people. The integration of our recent additions of CTPartners’ personnel from around the world has gone smoothly. We feel that a transaction would be beneficial to both Caldwell’s shareholders and its search consultants.""Why is Hoffmann so anxious? Actually, there is no evidence that the CTPartners "additions" have gone smoothly. It is not even clear how many people have joined. This is a complete lie. In fact, DHR's press release of July 2 claimed DHR had "more than 70 offices" as a result of the CTPartners deal. The press release of July 13 says they only have "more than 60+ offices" (why both "more than" and "+"?). In other words, they picked up fewer offices than they originally claimed.
And is David Hoffmann the Chairman of DHR International or not? Since March, 2015 Stephen Hayes has been listed as the Chairman. It is poor governance to have two people running around claiming to be "Chairman".
Caldwell Partners' employees themselves should be aware of how the CTPartners "acquisition" played out:
- DHR made a hostile bid for CTPartners, with tip-offs to Hunt Scanlon Media.
- Many CTPartners consultants, not wanting to join DHR, defected.
- CTPartners' debt covenants were breached due to the large number of departing consultants.
- CTPartners share price crumbled.
- DHR reduced their stake.
- CTPartners share price crumbled further.
- DHR became the only bidder in CTPartners and entered into an exclusive due diligence.
- DHR decided not to acquire CTPartners, but did a deal with the lenders to buy certain assets.
- CTPartners found they could not continue to trade.
- DHR hope to hire (on onerous contracts) CTPartners consultants who have nowhere else to go.
- DHR have one less competitor in the market.
There has been movement from Caldwell to DHR in the past including Sean Scanlon (presumably a relation of Scott Scanlon), Smooch Repovich Reynolds, Jerry McGrath, Carol Hartman, Jessica Henselmann and Elaine Lee. More nervous will be those that have gone from DHR to Caldwell include John Wasley, John Blank and Mark Dillard.