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Pure Profile claims it was misled over its $25m+ acquisition of digital agency Cohort

The management of online research platform  and digital advertising company Pure Profile has hit back at attempts by rebel shareholders to oust the company chairman, suggesting the organisation was misled when it bought digital agency Cohort.

The announcement to the ASX comes three days after shareholder Oceania Capital Partners called for the sacking from the board of executive chairman Andrew Edwards based on the company’s declining share price and commercial struggles.

Today, Edwards’ team refuted the claims in a new statement to the ASX.

Edwards: Fighting to retain board position

The moves come just five weeks after the departure of founder Paul Chan and his replacement as CEO by Nic Jones.

The disagreement with Oceania Capital Partners has arisen because the company was one of the owners of lead generation agency Cohort, which was sold to Pure Profile in September 2016. The final $1.4m earnout payment which OCP believes is due has not been made by Pure Profile. The company agreed to pay $15m in cash and $3m worth of shares. Thanks to earnout provisions, this would later rise by a further $4.6m and 8.9m shares.

Pure Profile suggested today that the sellers of Cohort misled it about the state of the business at the time they sold it. It blames its languishing share price – Pure Profile’s current market capitalisation is less than $17m –  on the market having become aware of these problems.

It wrote: “Based on feedback received from shareholders and investors, the board considers that the erosion of share value is predominantly a result of market dissatisfaction with the Cohort acquisition.

“Pure Profile’s rights against the vendors in relation to information they provided to Pure Profile to induce it to transact and their conduct while managing the business during the earn out period are strictly reserved.”

It revealed: “OCP is currently in dispute with Pureprofile over the calculation and payment of the earn-out payment and in relation to claims that Pureprofile’s lawyers have articulated against the Cohort vendors, alleging breach of warranties given in the Cohort sale agreement and for misleading conduct by the Cohort vendors during the sale process.”

According to today’s announcement, Jones’ short time in charge has already seen the company’s fortunes begin to turn around. It claimed: “Pureprofile’s turnaround under the management team of Andrew Edwards and Nic Jones is progressing strongly. The company is growing, and profitability is improving, with lucrative new business wins and a strong pipeline of large and more comprehensive opportunities.” The statement did not reveal what the new business wins consisted of.

It promised that the current financial half year – which is already two months gone – will see improvements in the company’s health. It said: “Revenues for the second half of FY2018 are forecast to grow (as stated in our half year results) and costs are forecast to fall.”

In its previous statement to the market on Tuesday, Pure Profile claimed it had a “previously disclosed dispute with the Cohort vendors”. However,  Mumbrella was unable to find any examples of the dispute having been previously disclosed the ASX until today; Pure Profile did not respond to a number of requests from Mumbrella earlier this week for further information on when the disclosure had previously been made.

Today’s announcement from Pure Profile did not set a date for a general meeting requested by OCP to vote on motions to oust Edwards and replace him on the board with Cohort founder Marcelo Ulvert.

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