Porchlight Equity Management, LLC, as the general partner of Highland Consumer Fund I Limited Partnership, Highland Consumer Fund I-B Limited Partnership and Highland Consumer Entrepreneurs Fund I Limited Partnership, collectively the owners of approximately 12.8% of the outstanding common shares of DAVIDsTEA INC., announces that it has sent a letter to the board of directors of DAVIDsTEA seeking explanations regarding the recent resignations of two newly elected directors, namely Messrs. M. William Cleman, who had been named DAVIDsTEA's "lead director", and Roland Walton.
DAVIDsTEA announced the resignation of M. William Cleman on July 26, 2018 and that of Roland Walton on July 13, 2018, providing no explanation as to the reasons for the resignations and indicating only that board committees had been commissioned to initiate the process of their replacement. Furthermore, DAVIDsTEA has not identified which of the remaining directors will assume the role of "lead director" that had been held by Mr. Cleman.
Messrs. Cleman and Walton were elected to the board of directors on June 14, 2018 at the annual meeting of shareholders. They, together with five other directors, formed the slate of nominees proposed by Herschel Segal through his holding company Rainy Day Investments Ltd. ("RDI"), holding approximately 46.4% of the outstanding shares of DAVIDsTEA, by way of dissident proxy circular dated May 11, 2018. Because Mr. Segal, through RDI, is the principal shareholder of DAVIDsTEA, he was able to obtain sufficient votes to elect his slate rather than the slate that had been proposed by the management of DAVIDsTEA.
"It is surprising and disheartening that two newly minted directors who were nominees of Mr. Segal have suddenly resigned in quick succession, following a hotly contested shareholders' meeting held only weeks ago," said Peter Cornetta, Senior Managing Director of Porchlight. "RDI repeatedly cited the extensive experience of Messrs. Cleman and Walton in operating retail businesses in Canada. Now these experienced directors have resigned from the board raising concerns about the loss of their respective experience, and fears that their resignations indicate a dysfunctional relationship between the independent directors and Mr. Segal."
Mr. Cornetta added: "Considering the efforts undertaken by Mr. Segal to reconstitute the board, and his achieving this, the remaining directors of DAVIDsTEA owe shareholders an explanation as to what went wrong. It is also incumbent upon the remaining board to be extremely judicious if it intends to appoint replacements for Messrs. Cleman and Walton without shareholder approval, given that they were only recently elected by the shareholders. That's why we have gone public with our request and why we hope that DAVIDsTEA will be publicly forthcoming in its answers."
About the Highland Funds
Managed by Porchlight Equity Management, LLC, the Highland Funds specialize in retail, services and consumer products investment opportunities in growth-focused companies with proven business models, operating in attractive growth markets. The funds bring together an investment team with extensive experience growing, operating and investing in successful consumer companies. They also offer companies a unique value proposition through the hands-on guidance and active involvement of their operating partners. The Highland Funds have invested in such firms as DAVIDsTEA, Indochino, J.McLaughlin, Merrick Pet Care, Pharmaca Integrative Pharmacy, Pinkberry and Trupanion. For more information, visit Porchlight Equity's web site at http://www.porchlightequity.com.
