PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 450 Lexington Avenue, New York, NY 10017 7 Finsbury Square, London EC2A 1AF, United Kingdom
MEMORANDUM
Matter No.: 1022-00003
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I. EXECUTIVE SUMMARY
Calderwood & Harkness LLP has been engaged (pursuant to the engagement letter dated February 28, 2023) by Northgate Telecommunications PLC ("NTP" or the "Company") in connection with the activist campaign initiated by Greystone Capital Partners LP ("Greystone" or "GCP"), a New York–based activist hedge fund with approximately $7.6 billion in assets under management. This memorandum sets forth our preliminary legal analysis of Greystone's regulatory filings and public demands, evaluates NTP's existing corporate governance framework and defensive posture, and recommends a comprehensive response strategy designed to protect the interests of the Company and its shareholders.
On February 14, 2023, Greystone filed a Schedule 13D with the United States Securities and Exchange Commission (the "SEC"), disclosing beneficial ownership of 28,016,000 shares of NTP common stock, representing approximately 6.8% of the 412,000,000 shares of NTP common stock outstanding. Greystone accumulated this position over a period of approximately five months, from September 2022 through January 2023, at an estimated average cost basis of approximately $31.47 per share, implying a total position cost of approximately $881.5 million.
On February 22, 2023 — eight days following the Schedule 13D filing — Greystone published an open letter addressed to the NTP Board of Directors (the "Board") articulating four specific demands:
(i) The appointment of two Greystone-designated directors to the Board;
(ii) The formation of a new Board committee focused on operational excellence;
(iii) The initiation of a formal strategic review of NTP's Enterprise Software Division ("ESD"); and
(iv) The implementation of a $500 million accelerated share repurchase ("ASR") program.
This memorandum analyzes each of these demands in the context of Greystone's Schedule 13D disclosure, NTP's Certificate of Incorporation and Bylaws, the Delaware General Corporation Law (the "DGCL"), applicable fiduciary duty standards, and the practical dynamics of a potential proxy contest at the Company's 2023 Annual General Meeting (the "2023 AGM"), currently scheduled for July 12, 2023. We also evaluate Greystone's likely proxy contest strategy, the composition of NTP's institutional shareholder base, and the expected posture of the major proxy advisory firms.
Our key recommendation is that NTP pursue a dual-track strategy that combines (a) constructive, good-faith private engagement with Greystone and its counsel, with (b) concurrent and rigorous preparation for a potential proxy contest. In support of this dual-track approach, we recommend the following immediate actions:
• Retain Hargrove Advisory Group LLC ("Hargrove") as NTP's proxy solicitor for the purposes of shareholder sentiment analysis, proxy contest preparedness, and proxy advisory firm engagement;
• Formally engage Esterline Partners LLC ("Esterline") as NTP's financial advisor to advise on the ESD strategic review, evaluate capital allocation alternatives (including the proposed ASR), and provide activism defense advisory services;
• Convene a special session of the Board to discuss the activism campaign and authorize management and counsel to initiate private dialogue with Greystone; and
• Authorize private outreach to Greystone through Calderwood & Harkness to Greystone's counsel at Whitaker, Drummond & Chase LLP, with the objective of exploring the potential for a negotiated resolution that serves the interests of all NTP shareholders.
We believe that this approach will position NTP to achieve a constructive outcome — whether through a negotiated cooperation agreement or, if necessary, through a successful defense at the 2023 AGM — while fulfilling the Board's fiduciary duties under Delaware law.
The balance of this memorandum is organized as follows: Section II provides relevant background on NTP, Greystone, and the timeline of events; Section III analyzes Greystone's Schedule 13D; Section IV analyzes Greystone's public letter and its four demands; Section V reviews NTP's corporate governance and defensive posture under the DGCL; Section VI evaluates Greystone's likely proxy contest strategy; Section VII sets forth our recommended dual-track response strategy; Section VIII addresses Delaware fiduciary duty considerations relevant to a potential settlement; and Section IX summarizes our conclusions and recommendations.
II. BACKGROUND
A. Northgate Telecommunications PLC — Company Overview
Northgate Telecommunications PLC is a public limited company incorporated under the laws of the State of Delaware. The Company's shares of common stock are listed and traded on the New York Stock Exchange under the ticker symbol "NTP." NTP maintains its principal executive offices at 45 Broadwick Street, London W1F 0DB, United Kingdom, and its Delaware registered office is located c/o Meridian Registered Agents, Inc., 1209 Orange Street, Wilmington, Delaware 19801.
NTP operates in two principal business segments: (i) telecommunications infrastructure, which encompasses the Company's legacy wireline and wireless network services, fiber optic deployment, and managed connectivity solutions, and (ii) enterprise software and software-as-a-service ("SaaS"), conducted through the Enterprise Software Division. For the fiscal year ended December 31, 2022 ("FY 2022"), NTP reported consolidated revenue of $6.38 billion. The Enterprise Software Division contributed $1.82 billion in FY 2022 revenue, representing approximately 28.5% of total Company revenue ($1.82 billion ÷ $6.38 billion = 28.5%). The ESD has been the Company's fastest-growing segment, with revenue growth outpacing the telecommunications infrastructure segment in each of the last three fiscal years.
As of the date of Greystone's Schedule 13D filing on February 14, 2023, the Company had 412,000,000 shares of common stock issued and outstanding. Based on the closing share price of $34.51 on February 14, 2023, NTP's market capitalization was approximately $14.22 billion (412,000,000 shares × $34.51 per share). The Company's transfer agent is Pinnacle Trust Company, N.A. The Company's independent registered public accounting firm is Whitfield & Keane LLP, with offices in London and New York.
The Company's senior management team includes:
• Fiona Caldwell, age 54, Chief Executive Officer, appointed in 2020. Ms. Caldwell previously served as President and Chief Operating Officer of NTP from 2017 to 2020 and, prior to joining NTP, held senior leadership positions at Meridian Corporation and Tidewater Partners LLC.
• Graham Phelps, age 49, Chief Financial Officer, appointed in 2021. Mr. Phelps joined NTP from Northpoint Consulting Group, where he served as a Managing Director in the Communications, Media & Technology practice.
• Priya Nandakumar, age 46, General Counsel and Corporate Secretary, appointed in 2019. Ms. Nandakumar is a member of the New York and England & Wales bars and previously was a partner at Stillwell & Linley LLP, specializing in cross-border M&A and capital markets transactions.
NTP's Board of Directors currently consists of eleven (11) directors, ten (10) of whom are independent non-executive directors. The sole management director is CEO Fiona Caldwell. The Board is chaired by Sir Edmund Prumvane, age 68, who has served as independent non-executive Chairman since 2018. Sir Edmund previously served as Group Chief Executive of Sovereign Communications Group plc from 2002 to 2016 and is a Knight Commander of the Order of the British Empire (KBE).
The Company's Delaware incorporation file number is 5738291. Its SEC Central Index Key ("CIK") is 0001847263. Its Employer Identification Number ("EIN") is 84-3291057.
B. NTP Share Price Context
An understanding of NTP's recent share price performance is critical to evaluating the basis for Greystone's activism thesis and the persuasiveness of its demands to the Company's broader shareholder base.
• NTP share price on February 14, 2023 (date of Schedule 13D filing): $34.51 per share.
• NTP share price on February 27, 2023 (date this matter was opened at Calderwood & Harkness LLP): $35.12 per share.
• 52-week high (as of February 2023): $41.20 per share.
• 52-week low (as of February 2023): $28.63 per share.
As of the date of Greystone's filing, NTP's share price was trading approximately 16.2% below the 52-week high of $41.20 and approximately 20.5% above the 52-week low of $28.63. The stock has traded in a relatively wide range over the trailing twelve months, suggesting that the market has not converged on a clear valuation consensus for the Company. This trading pattern is consistent with an undervaluation thesis of the type typically advanced by activist investors — namely, that management execution, capital allocation, or corporate structure decisions have suppressed the Company's share price relative to intrinsic value. Greystone's estimated average cost basis of approximately $31.47 per share suggests that the fund accumulated the bulk of its position at prices below the current trading range, providing it with an embedded gain that affords both financial cushion and rhetorical credibility in asserting that its interests are aligned with those of long-term shareholders.
The share price increased modestly following the public disclosure of Greystone's position, rising from $34.51 on the filing date to $35.12 on February 27, 2023 — a gain of approximately 1.8%. This muted reaction may reflect the market's view that a constructive outcome is likely, or alternatively that Greystone's demands are not yet fully understood or priced in by investors.
C. Greystone Capital Partners LP — Profile
Greystone Capital Partners LP is a Delaware limited partnership that operates as an activist-oriented hedge fund. Its general partner is Greystone Capital Management LLC, a Delaware limited liability company. Greystone's principal place of business is located at 590 Madison Avenue, 34th Floor, New York, New York 10022.
Greystone manages approximately $7.6 billion in assets under management, making it a mid-to-large-sized activist fund. The firm was founded by Dominic Ferraro, age 52, who serves as Managing Partner and is the controlling person of Greystone Capital Management LLC. Mr. Ferraro previously worked at Cascade Investment Management and Tidewater & Co. before founding Greystone in 2011. The portfolio manager responsible for the NTP position is Lena Ostrowski, age 41, who serves as a Partner and Senior Portfolio Manager at Greystone. Ms. Ostrowski previously served as a Director at Ashbury Investment Management and has significant experience in the technology, media, and telecommunications sectors. Greystone's Employer Identification Number is 83-2674510.
Greystone is represented in this matter by Whitaker, Drummond & Chase LLP, a prominent activism-focused law firm with offices at 787 Seventh Avenue, New York, New York 10019. The lead partner on the engagement is Jonathan Whitaker, age 59, a founding partner of the firm who is widely recognized as one of the leading activist defense and offense practitioners in the United States. The associate is Maya Krishnamurthy, age 34.
Greystone's financial advisor is Veltrano Advisors LLC, an independent advisory firm located at 399 Park Avenue, Suite 1600, New York, New York 10043. The lead advisor is Peter Lundgren, age 47, a Managing Director with extensive experience advising activist funds on contested situations.
Greystone has a well-documented track record of activist campaigns in the technology and telecommunications sectors. Over the past seven years, Greystone has publicly disclosed activist positions in at least twelve public companies, with outcomes ranging from negotiated board settlements and strategic transactions to contested proxy fights. Greystone is generally regarded as a "constructive" activist — that is, one that prefers negotiated outcomes over protracted public disputes — though it has demonstrated a willingness to pursue proxy contests when negotiations fail. This reputation is relevant to our strategic analysis: Greystone is likely to pursue a settlement if NTP demonstrates genuine engagement, but it is well-equipped to wage a proxy fight if it perceives the Company as stonewalling.
D. Timeline of Key Events
The following timeline summarizes the key events leading to the current engagement:
We note that the interval between Greystone's crossing of the 5% threshold (January 9, 2023) and the filing of the Schedule 13D (February 14, 2023) was approximately thirty-six days. While the SEC regulations require a Schedule 13D to be filed within ten calendar days of crossing the 5% threshold, the filing window has historically been interpreted with some flexibility, and late filings — while technically non-compliant — are common among activist investors. We have reviewed the filing dates and do not believe that NTP would benefit from raising a procedural challenge on this point, as the SEC has historically not brought enforcement actions for modest filing delays by activist investors, and any such challenge would likely be viewed unfavorably by the market and institutional shareholders as a dilatory tactic. We will continue to monitor Greystone's compliance with Schedule 13D amendment obligations as developments warrant.
III. ANALYSIS OF GREYSTONE'S SCHEDULE 13D
A. Ownership Disclosure
On February 14, 2023, Greystone Capital Partners LP filed a Schedule 13D with the SEC (SEC file number SC 13D/005-91482) pursuant to Sections 13(d)(1) and 13(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rules 13d-1 and 13d-2 thereunder. The filing discloses the following material information:
Reporting Persons. The filing identifies three reporting persons: (i) Greystone Capital Partners LP, as the direct beneficial owner of the shares; (ii) Greystone Capital Management LLC, as the general partner of Greystone Capital Partners LP and the entity exercising investment and voting discretion over the shares; and (iii) Dominic Ferraro, as the managing member and controlling person of Greystone Capital Management LLC. Each reporting person is identified as having shared voting power and shared dispositive power over the reported shares.
Shares Beneficially Owned. Greystone reports beneficial ownership of 28,016,000 shares of NTP common stock. This represents approximately 6.8% of the outstanding shares (28,016,000 ÷ 412,000,000 = 6.7961%, rounded to 6.8%).
Average Cost Basis and Total Position Cost. While the Schedule 13D itself does not disclose the average cost basis (this figure is derived from our independent analysis of the trading data and confirmation from Greystone's filing supplements), we estimate that Greystone's average acquisition cost was approximately $31.47 per share, implying a total position cost of approximately $881.5 million (28,016,000 shares × $31.47 = $881,543,520). Based on the closing share price of $34.51 on the date of filing, Greystone's unrealized gain was approximately $85.2 million, or approximately 9.7% on invested capital.
Accumulation Period. The filing and supporting exhibits indicate that Greystone accumulated its NTP position through open market purchases conducted from approximately September 2022 through January 2023. The filing specifically notes that Greystone crossed the 5% beneficial ownership threshold on January 9, 2023. Although the 13D was not filed until February 14, 2023 — more than ten calendar days after the threshold crossing — as discussed in Section II.D above, we do not believe this timing issue provides a productive basis for challenge.
Source of Funds. The filing discloses that the shares were acquired using available partnership capital. No margin financing, bank borrowings, or other leveraged funding arrangements are disclosed. This is relevant to the Company's defensive analysis because it suggests that Greystone is not subject to lender-imposed constraints that might limit its flexibility or time horizon in pursuing the campaign.
B. Item 4 — Purpose of Transaction
Item 4 of the Schedule 13D is the most significant substantive disclosure for the Company's purposes, as it sets forth Greystone's stated purpose in acquiring the NTP shares and its intentions with respect to future actions.
The Item 4 disclosure states, in relevant part, that Greystone "acquired the Shares because it believes they are undervalued and represent an attractive investment opportunity." The filing further states that Greystone "intends to engage in discussions with the Board of Directors and management of [NTP] regarding ways to enhance shareholder value, including through improvements to the Company's operations, capital allocation strategy, and corporate governance practices."
More specifically, the Item 4 disclosure identifies the following areas of intended engagement:
(a) Board Representation. Greystone states its intention to "seek the appointment of qualified, independent directors to the Board who possess relevant operational expertise and who will bring fresh perspectives to the Company's strategic decision-making."
(b) Operational Excellence. Greystone expresses its intent to "advocate for the formation of a Board committee dedicated to overseeing margin improvement initiatives, cost reduction programs, and operational efficiency across the Company's business units."
(c) Strategic Review of the Enterprise Software Division. Greystone discloses its intention to "propose that the Board undertake a comprehensive strategic review of the Company's Enterprise Software Division, including an evaluation of whether the Division's value would be maximized through continued operation within the Company, a spin-off to shareholders, or a sale to a strategic or financial acquirer."
(d) Capital Return Program. Greystone states its intent to "advocate for the initiation of a $500 million accelerated share repurchase program to return excess capital to shareholders and signal confidence in the Company's intrinsic value."
Critically, the Item 4 disclosure also includes the following reservation of rights language, which is standard in activist 13D filings but warrants careful attention:
"The Reporting Persons reserve the right to take any and all actions that they may deem appropriate to maximize shareholder value, including but not limited to (i) engaging in communications with shareholders, management, and the Board of Directors of the Company, (ii) nominating candidates for election to the Board, (iii) soliciting proxies or written consents from shareholders, (iv) making proposals at annual or special meetings of shareholders, (v) acquiring additional securities of the Company, (vi) disposing of some or all of the securities of the Company, (vii) entering into or terminating derivative or hedging transactions with respect to the Company's securities, and (viii) taking such other actions as the Reporting Persons may determine are necessary or appropriate in furtherance of their interests."
This reservation-of-rights language is broadly drafted and signals that Greystone has not foreclosed any strategic option, including the commencement of a proxy contest at the 2023 AGM. It also preserves Greystone's ability to acquire additional shares, form coalitions with other shareholders, and pursue derivative or hedging strategies — any of which could materially alter the dynamic of the engagement.
C. Other Notable 13D Disclosures
Several additional aspects of the Schedule 13D filing warrant comment:
Funding and Leverage. As noted above, the filing discloses that the shares were acquired using available partnership capital. No margin financing, revolving credit facilities, or other leveraged arrangements are disclosed. The absence of leverage suggests that Greystone's position is not subject to margin calls or other financing-related pressure points that might create urgency on Greystone's side of a negotiation.
Arrangements or Understandings. Item 5 of the Schedule 13D states that no agreements, arrangements, or understandings exist between Greystone and any other person with respect to the securities of NTP. Specifically, no "group" has been formed within the meaning of Section 13(d)(3) of the Exchange Act. This means that, as of the date of filing, Greystone is acting alone and has not entered into any joint action or voting agreement with other NTP shareholders. However, this does not preclude Greystone from forming a group or entering into such arrangements in the future, subject to the requirement that any such group formation would trigger an amendment to the Schedule 13D.
Derivatives and Synthetic Positions. The filing does not disclose any economic interest in NTP securities beyond the 28,016,000 shares of common stock. There are no total return swaps, cash-settled equity derivatives, options, or other synthetic positions disclosed. While this simplifies our defensive analysis — inasmuch as we need not evaluate the regulatory and governance implications of undisclosed economic exposure — it is important to note that Greystone could acquire derivative positions in the future without immediately triggering a disclosure obligation, depending on the nature and terms of such instruments.
Observations. The clean, straightforward nature of the 13D filing — common stock only, no leverage, no group, no derivatives — is consistent with Greystone's reputation as a "fundamentals-based" activist that seeks to engage constructively with target companies. The filing does not contain the inflammatory language or detailed critique of management that is sometimes found in more aggressive 13D filings. This posture is consistent with a fund that prefers settlement over confrontation, which supports our recommendation for a dual-track engagement strategy.
At the same time, the breadth of the reservation-of-rights language in Item 4, combined with the retention of experienced activist counsel and a financial advisor, indicates that Greystone is well-prepared to escalate if it does not achieve its objectives through private engagement.
IV. ANALYSIS OF GREYSTONE'S PUBLIC LETTER (FEBRUARY 22, 2023)
A. Overview of the Four Demands
On February 22, 2023 — eight days after the filing of the Schedule 13D — Greystone published an open letter addressed to the Board of Directors of NTP (the "Open Letter"). The Open Letter was posted on Greystone's website, distributed via Calderon Data Systems, and covered by major financial media outlets including The Wall Street Journal, Westmark Services Inc., and the Granite Harbor Corporation. The Open Letter is signed by Dominic Ferraro in his capacity as Managing Partner of Greystone Capital Partners LP.
The Open Letter adopts a measured, professional tone. It acknowledges the Company's market position and the capabilities of its management team while asserting that "significant opportunities exist to unlock value for all shareholders through improvements to governance, operational execution, and capital allocation." The letter articulates four specific demands, which mirror the areas of intended engagement disclosed in Item 4 of the Schedule 13D. We analyze each demand below.
B. Demand 1: Appointment of Two Greystone-Designated Directors
Greystone demands that NTP appoint two individuals of Greystone's choosing to the Board, asserting that the current Board "lacks sufficient depth of operational expertise in the software and SaaS sectors" and that "additional perspectives on capital allocation and value creation would meaningfully benefit the Board's deliberations."
The Open Letter does not identify specific nominees. Rather, it states that Greystone "is prepared to propose highly qualified, independent candidates with deep domain expertise in software, SaaS, and telecommunications who would bring meaningful value to the Board's strategic oversight." Based on our experience with Greystone's prior campaigns and the typical sequence of events in these situations, we anticipate that Greystone will identify its nominees in connection with any advance notice of nomination filed pursuant to NTP's Bylaws, or, if a settlement is reached, during the negotiation process.
Analysis. The demand for two board seats warrants careful evaluation. From a governance standpoint, we note the following:
• NTP's Board currently consists of eleven directors. Adding two Greystone-designated directors — whether through expansion of the Board to thirteen or through replacement of existing directors — would give Greystone-affiliated directors representation equal to approximately 15–18% of the Board, significantly exceeding Greystone's 6.8% economic stake.
• Market precedent suggests that one board seat is a more typical outcome for an activist holder in the sub-10% ownership range engaging with a company of NTP's market capitalization. A review of the fifteen most comparable activism settlements in the U.S. technology and telecommunications sectors over the past three years reveals that approximately 73% resulted in the appointment of one activist-designated director, approximately 20% resulted in two, and approximately 7% resulted in three or more.
• The demand for two seats may represent an opening negotiating position. It is common for activist investors to request more than they expect to receive, with the expectation that settlement negotiations will converge on a lower number.
• That said, the Board should not dismiss the possibility that Greystone genuinely believes two seats are warranted. If Greystone perceives the Board as insufficiently responsive to its concerns, it may use the two-seat demand as leverage to seek more aggressive concessions on other fronts.
Our recommendation, discussed in greater detail in Section VII, is that NTP be prepared to negotiate the appointment of one Greystone-designated director as part of a comprehensive cooperation agreement, provided that the nominee is genuinely qualified, independent (in the NYSE listing standards sense), and acceptable to the Board's Nominating and Governance Committee. We believe that one seat is a proportionate and defensible outcome given Greystone's ownership stake and the composition of the existing Board.
We also note — as a subsequent development — that Greystone filed its advance notice of nomination on March 8, 2023, nominating two candidates for the Class I seats up for election at the 2023 AGM:
• Catherine "Kate" Sinclair-Moreau, age 48, former Chief Operating Officer of Ridgeline Networks Inc., and currently an independent director at Brindoval Data Holdings Corp. and Arden Communications Group Inc. Ms. Sinclair-Moreau has extensive operational experience in telecommunications and enterprise software, including a track record of leading margin improvement and operational efficiency initiatives.
• marshall Henning, age 55, former Chief Financial Officer of Lakeshore Broadband Corp. Mr. Henning has deep expertise in capital allocation, financial planning, and investor relations, and has served as an independent director at two publicly traded companies following his departure from Lakeshore.
Both nominees are credentialed and experienced. They represent the type of nominees that proxy advisory firms and institutional shareholders tend to view favorably. This underscores the seriousness of Greystone's campaign and the importance of engaging constructively before positions harden.
C. Demand 2: Formation of an Operational Excellence Committee
Greystone proposes the formation of a new standing committee of the Board (an "Operational Excellence Committee") that would be "charged with overseeing the Company's margin improvement initiatives, cost reduction programs, and operating efficiency across all business segments." The Open Letter asserts that "NTP's operating margins have lagged those of its peers in both the telecommunications and enterprise software sectors" and that "a dedicated committee focused on operational excellence would provide the Board with a more rigorous framework for overseeing management's execution."
Analysis. The demand for a new Board committee is a relatively common element of activist campaigns, and the concept of enhanced Board oversight of operational performance is not inherently objectionable. However, we believe the demand can be addressed without the creation of an entirely new committee.
NTP's Board currently maintains the following standing committees:
• Audit Committee — Chaired by Elaine Beaumont-Cross, with oversight responsibility for financial reporting, internal controls, and risk management.
• Compensation Committee — Chaired by David Duplessis, with oversight responsibility for executive compensation, incentive programs, and human capital management.
• Nominating and Governance Committee — Chaired by Amara Okonkwo, with oversight responsibility for Board composition, director nominations, and corporate governance practices.
• Technology & Strategy Committee — Chaired by Margaret Liu, with oversight responsibility for technology strategy, product development, cybersecurity, and strategic planning, including M&A.
The Technology & Strategy Committee, in particular, already has a mandate that overlaps significantly with the proposed Operational Excellence Committee. The Committee's charter — last revised in September 2022 — includes responsibility for reviewing and advising the Board on "the Company's strategic plan, including operational priorities, competitive positioning, and key performance metrics." Similarly, the Audit Committee's oversight of risk management encompasses certain operational risk factors.
We recommend that, rather than creating a new committee, the Board consider an expansion of the Technology & Strategy Committee's charter to explicitly include oversight of margin improvement initiatives and operational efficiency targets. This approach would address the substance of Greystone's concern while avoiding the proliferation of Board committees, which can lead to jurisdictional confusion, increased governance complexity, and additional demands on director time. If the Board determines to appoint a Greystone-designated director as part of a settlement, that director could be appointed to the Technology & Strategy Committee, providing Greystone with direct visibility into the operational oversight process.
D. Demand 3: Strategic Review of the Enterprise Software Division (ESD)
Greystone demands that the Board initiate a formal strategic review of the Enterprise Software Division, which generated $1.82 billion in FY 2022 revenue — approximately 28.5% of total NTP revenue. Greystone's Open Letter asserts that "the Enterprise Software Division is a high-growth, high-margin business that is not receiving appropriate market credit within NTP's current conglomerate structure" and suggests that "the Division's value would be more fully realized as a standalone public company or through a sale to a strategic acquirer."
The Open Letter cites publicly available data suggesting that pure-play enterprise software and SaaS companies trade at meaningfully higher revenue and EBITDA multiples than diversified telecommunications companies. Greystone asserts that, based on its analysis, the ESD could be valued at between $4.5 billion and $6.0 billion on a standalone basis, compared to the implied value of approximately $4.0 billion that the market currently assigns to the division within NTP's consolidated valuation.
Analysis. This is the most substantively significant of Greystone's four demands, and it warrants careful consideration by the Board for reasons that extend beyond the activism context. Several considerations are relevant:
• Valuation disconnect. There is a credible argument that the public markets undervalue the ESD within NTP's consolidated structure. Pure-play SaaS companies with comparable revenue scale and growth profiles have traded at revenue multiples of 3.0x–5.0x in recent quarters, compared to the blended multiple at which NTP's equity trades (approximately 2.2x FY 2022 revenue based on the current market capitalization). Even applying conservative assumptions, a standalone ESD could command a higher valuation than the implied value currently attributed to it by the market.
• Operational Synergies. The Board will need to evaluate the extent to which the ESD benefits from operational synergies with NTP's telecommunications infrastructure segment — including shared customers, cross-selling opportunities, shared technology platforms, and centralized corporate functions. If these synergies are substantial, a separation could result in dissynergies that offset the valuation uplift.
• Strategic Optionality. A strategic review need not result in a separation. It could affirm the Board's conclusion that the ESD is best operated within the NTP family, while also generating insights into operational improvements, go-to-market strategies, and organizational structure that enhance the Division's performance within the current corporate structure. Importantly, a Board-initiated strategic review — undertaken voluntarily and announced proactively — carries significantly different optics than a review demanded by an activist and perceived as reactive.
• Precedent. Numerous companies in the technology and telecommunications sectors have undertaken strategic reviews of non-core or high-growth divisions in recent years, resulting in spin-offs (e.g., Bramwell Partners LLC's separation of Kyndryl), sales (e.g., Ashgrove & Co.'s divestiture of Cascade Health IT/Greaves Solutions media assets), or affirmations of the existing structure. The Board has ample precedent for conducting such a review without committing to any particular outcome.
We recommend that the Board seriously consider initiating a strategic review of the ESD, with the assistance of Esterline Partners LLC as financial advisor. Critically, we recommend that the Board frame any such review as a Board-initiated strategic initiative rather than a concession to Greystone's demands. This framing will preserve the Board's credibility and independence, demonstrate proactive governance, and provide the Board with the analytical foundation to respond to Greystone's claims with specificity and authority.
E. Demand 4: $500 Million Accelerated Share Repurchase Program
Greystone demands that NTP implement a $500 million accelerated share repurchase program, asserting that "NTP's shares are significantly undervalued relative to their intrinsic value" and that "the Company's balance sheet has sufficient capacity to support a meaningful capital return without compromising investment in organic growth or strategic acquisitions."
Analysis. The demand for an ASR of this magnitude raises several considerations:
• Share Retirement Mechanics. At the current share price of approximately $34.51 per share, a $500 million ASR would result in the retirement of approximately 14.5 million shares, representing approximately 3.5% of the 412 million shares currently outstanding (14,490,000 ÷ 412,000,000 = 3.52%). An ASR of this size would be among the larger capital return actions taken by NTP in recent years and would have a meaningful — though not transformative — impact on per-share financial metrics.
• Balance Sheet Capacity. We understand from preliminary discussions with NTP's CFO, Graham Phelps, that the Company currently maintains approximately $1.2 billion in cash and cash equivalents and approximately $2.8 billion in total debt, resulting in net debt of approximately $1.6 billion. A $500 million ASR would reduce the Company's cash position by approximately 42% and increase its net leverage ratio. While the Company's balance sheet could likely accommodate an ASR of this magnitude without breaching existing debt covenants, the impact on financial flexibility — particularly if the Board is simultaneously evaluating an ESD strategic review that might involve significant advisory and transaction costs — requires careful evaluation.
• Existing Buyback Authorization. We understand that NTP's Board previously authorized a share repurchase program of up to $750 million, of which approximately $300 million remained available as of December 31, 2022. The existing authorization may be sufficient to support a portion of the requested ASR without the need for additional Board action, though the scope and pace of repurchases contemplated by Greystone would significantly exceed the Company's recent repurchase activity.
• Interaction with ESD Strategic Review. There is a tension between Greystone's simultaneous demands for a $500 million ASR and a strategic review of the ESD. If the strategic review results in a decision to separate the ESD — whether through a spin-off, sale, or IPO — the Company's capital allocation priorities would shift dramatically, and the deployment of $500 million toward share repurchases in advance of such a determination could prove premature or suboptimal.
• Accretive Effect on Greystone's Ownership. It bears noting that an ASR that retires 14.5 million shares would increase Greystone's percentage ownership from approximately 6.8% to approximately 7.1% (28,016,000 ÷ 397,510,000 = 7.05%), without Greystone purchasing any additional shares. While this increase is modest, it is a factor that the Board should be aware of when evaluating the alignment of Greystone's interests with those of the broader shareholder base.
We recommend that the Board not commit to a $500 million ASR as a condition of any settlement with Greystone. Instead, we recommend that the Board direct Esterline Partners LLC to prepare a comprehensive capital allocation analysis that evaluates the relative merits of share repurchases, organic investment, debt reduction, and strategic M&A in light of the Company's current financial position and strategic priorities. The results of this analysis should inform the Board's independent judgment on the appropriate level and timing of capital returns.
V. NTP'S CORPORATE GOVERNANCE AND DEFENSIVE POSTURE UNDER THE DGCL
A. Certificate of Incorporation
NTP's Amended and Restated Certificate of Incorporation (last amended May 14, 2021) (the "Certificate") contains several provisions that are directly relevant to the Company's defensive posture in the context of the Greystone activism campaign:
Classified Board. Article VI of the Certificate provides for a classified (or "staggered") Board of Directors, divided into three classes — Class I, Class II, and Class III — with each class serving staggered three-year terms. The current composition of the Board by class is as follows:
At the 2023 AGM, only the four Class I directors will be up for election. This is the single most significant structural defense available to the Company: even if Greystone were to prevail in a proxy contest and elect all four of its preferred candidates to the Class I seats, it would not gain majority control of the Board, as the remaining seven directors in Classes II and III would continue to serve until their respective terms expire.
Director Removal. Article VI of the Certificate further provides that directors may only be removed for cause by the affirmative vote of holders of at least 66⅔% of the outstanding shares entitled to vote in the election of directors. Greystone's 6.8% stake is far below this threshold, and assembling a coalition of shareholders holding two-thirds of the outstanding shares to remove a director for cause would be extraordinarily difficult absent a clear breach of fiduciary duty or comparable misconduct. As a practical matter, the supermajority removal provision makes it virtually impossible for Greystone to remove incumbent directors outside the ordinary election cycle.
Board Size. The Certificate and Bylaws authorize the Board to fix the number of directors within the range set forth therein. The Board currently has eleven members. The Board retains the authority to increase or decrease the Board's size by resolution, subject to applicable limitations. This authority is relevant because, in the event of a settlement, the Board could expand its size to twelve and appoint a Greystone-designated director to the newly created seat, without requiring the removal or replacement of any existing director.
Exclusive Forum Provision. Article IX of the Certificate designates the Court of Chancery of the State of Delaware (or, if the Court of Chancery lacks subject matter jurisdiction, the Superior Court of the State of Delaware, or, if neither Delaware state court has jurisdiction, the United States District Court for the District of Delaware) as the exclusive forum for certain categories of intra-corporate disputes, including derivative actions, actions asserting breach of fiduciary duty, actions arising under the DGCL, and actions asserting claims governed by the internal affairs doctrine. This provision is enforceable under Delaware law (Salzberg v. Sciabacucchi, 227 A.3d 102 (Del. 2020)) and ensures that any litigation arising out of the activism campaign would be adjudicated in Delaware's specialized courts.
No Cumulative Voting. The Certificate does not provide for cumulative voting in the election of directors. This means that shareholders vote on a per-director basis, and Greystone cannot concentrate its votes on a single nominee to increase its chances of electing a preferred candidate.
Blank Check Preferred Stock. Article IV of the Certificate authorizes the Board to issue one or more series of preferred stock, with such designations, preferences, limitations, and relative rights as the Board may determine, without further shareholder approval. This "blank check" authorization provides the Board with the legal authority to adopt a shareholder rights plan ("poison pill") if the Board determines that such a measure is warranted. We discuss the considerations for and against a rights plan in Section V.C below.
B. Bylaws
NTP's Amended and Restated Bylaws (last amended November 3, 2022) (the "Bylaws") contain several provisions of particular relevance:
Advance Notice Provisions. Article II, Section 12 of the Bylaws sets forth detailed advance notice requirements for shareholders seeking to nominate candidates for election to the Board or to bring other business before a meeting of shareholders. The advance notice provisions require that nominations and proposals be submitted to the Corporate Secretary not later than 90 calendar days prior to the date of the Annual General Meeting. For the 2023 AGM, which is scheduled for July 12, 2023, the advance notice deadline is April 12, 2023.
Any shareholder submitting a nomination is required to provide the following information:
(a) As to the nominee: the nominee's name, age, business and residential addresses, principal occupation, the number of shares of NTP stock beneficially owned, all information required to be disclosed pursuant to Regulation 14A under the Exchange Act, and a completed director questionnaire in the form provided by the Corporate Secretary;
(b) As to the nominating shareholder: the shareholder's name and address, the number of shares of NTP stock beneficially owned (including derivative positions, short interest, and other economic exposures), any agreements or arrangements with third parties relating to the nomination, any material interests in the nomination, and a representation as to the shareholder's intent with respect to proxy solicitation.
These provisions are designed to ensure that the Company and its shareholders have adequate notice and information regarding shareholder nominations, and to provide the Board with sufficient time to evaluate nominees and prepare its response. The provisions are customary for a Delaware public company and are generally enforceable, provided they are reasonable in scope and applied in a non-discriminatory manner.
Board Size. Article III, Section 2 of the Bylaws reiterates the Board's authority to fix the number of directors, currently set at eleven.
Special Meeting Rights. Article II, Section 3 of the Bylaws provides that a special meeting of shareholders may be called by (i) the Board, (ii) the Chairman of the Board, or (iii) shareholders holding at least 25% of the outstanding shares entitled to vote. Greystone would need to assemble a group holding approximately 103,000,000 shares — nearly four times its current position — to exercise this right. This is a significant practical hurdle and makes it unlikely that Greystone could force a special meeting unilaterally.
No Shareholder Action by Written Consent. Article II, Section 11 of the Bylaws provides that any action required or permitted to be taken by shareholders may be taken only at a duly called annual or special meeting, and that shareholders may not act by written consent in lieu of a meeting. This provision — which is permitted under Section 228(a) of the DGCL for companies that so provide in their certificates of incorporation — eliminates Greystone's ability to circumvent the annual meeting process by circulating a written consent solicitation.
C. Analysis of Defensive Mechanisms
Taken together, NTP's Certificate and Bylaws provide a robust defensive framework. The following summarizes the key defensive mechanisms and their practical implications:
Classified Board. The classified board is NTP's most significant structural defense. Because only one-third of the Board (or, in this case, four of eleven directors) is up for election at each annual meeting, Greystone cannot gain majority control of the Board in a single proxy contest. Even if Greystone were to win all four Class I seats at the 2023 AGM, it would hold only 4 of 11 seats (36%). To obtain majority control, Greystone would need to win additional seats at the 2024 and/or 2025 AGMs — a multi-year campaign that would require sustained commitment of resources and continued shareholder support.
Delaware courts have consistently upheld the validity of classified boards, including in the context of activist challenges. See Air Products & Chemicals, Inc. v. Airgas, Inc., 16 A.3d 48 (Del. Ch. 2011) (upholding a classified board as a valid defensive measure). However, it is important to note that proxy advisory firms, particularly ISS, generally disfavor classified boards and may issue voting recommendations that reflect this policy preference.
Supermajority Removal. The 66⅔% supermajority requirement for removal of directors for cause is a significant barrier. Greystone's 6.8% stake is approximately one-tenth of the threshold required, and even with the support of other dissident shareholders, assembling a two-thirds supermajority would be extremely challenging. This provision effectively insulates incumbent directors from removal outside the regular election cycle.
No Written Consent / Special Meeting Threshold. The prohibition on shareholder action by written consent and the 25% threshold for calling a special meeting collectively ensure that Greystone cannot bypass the annual meeting process. These provisions channel any proxy contest to the 2023 AGM and provide the Board with the benefit of the established meeting timetable.
Poison Pill Considerations. NTP does not currently have a shareholder rights plan in place. The Board retains the authority to adopt one under the DGCL and the blank check preferred stock authorization in the Certificate. A shareholder rights plan would deter Greystone from acquiring shares above a specified threshold (typically 10–15% of outstanding shares) by diluting any shareholder whose ownership exceeds the threshold.
However, the adoption of a rights plan in the current context raises significant practical and reputational considerations:
• Delaware Case Law. While Delaware courts have generally upheld the adoption of rights plans under appropriate circumstances (Moran v. Household Int'l, Inc., 500 A.2d 1346 (Del. 1985)), the Board's decision to adopt a rights plan would be subject to enhanced scrutiny under Unocal if challenged. The Board would need to demonstrate that it had reasonable grounds for believing a threat existed and that the rights plan was a proportionate response.
• Proxy Advisory Firm Policies. ISS and Tarrant Partners LLC have adopted policies that are generally hostile to shareholder rights plans, particularly "clear day" pills adopted in the absence of a specific, imminent threat. ISS's policy provides that it will generally recommend voting against directors who adopt a rights plan without shareholder approval, unless the pill includes a sunset provision and is adopted in response to a specific threat. The adoption of a rights plan in response to a 6.8% activist position — well below any reasonable triggering threshold — would likely be viewed negatively by proxy advisory firms and could undermine the Company's credibility in any proxy contest.
• Market Perception. The adoption of a rights plan would likely be perceived by the market and the Company's institutional shareholders as a defensive, entrenchment-oriented action. This could damage the Board's reputation for good governance and make it more difficult to secure shareholder support in a contested election.
For these reasons, we do not recommend the adoption of a shareholder rights plan at this time. The Company's existing defensive mechanisms — classified board, supermajority removal, no written consent, and the 25% special meeting threshold — provide adequate structural protection. If circumstances change materially — for example, if Greystone's ownership increases significantly or if evidence of a hostile group formation emerges — we would revisit this recommendation.
D. Delaware Fiduciary Duty Framework
The Board's response to Greystone's campaign must be guided by the fiduciary duties imposed on directors under Delaware law. The applicable standards are summarized below.
Business Judgment Rule. Under ordinary circumstances, the Board's decisions are protected by the business judgment rule, which creates a presumption that "in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company." Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984). The business judgment rule is a powerful shield: so long as the Board acts on an informed basis, in good faith, and without self-interest, its decisions will not be second-guessed by a court, even if the outcome proves to be suboptimal.
Unocal Enhanced Scrutiny. When the Board takes defensive measures in response to a perceived threat to corporate policy and effectiveness — including, for example, adopting a shareholder rights plan, implementing defensive charter amendments, or taking other actions designed to thwart a proxy contest — the Board's conduct is subject to enhanced scrutiny under the standard articulated in Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985). Under Unocal, the Board must demonstrate:
(i) That it had reasonable grounds for believing that a threat to corporate policy and effectiveness existed. This requires a showing that the Board conducted a reasonable investigation and acted in good faith. The Board may consider factors such as the adequacy of the price being offered (in a takeover context), the impact on constituencies other than shareholders, the risk of coercive tactics, and the threat posed by a particular shareholder proposal.
(ii) That the defensive measures adopted were reasonable in relation to the threat posed. This proportionality requirement ensures that the Board does not use defensive measures that are "draconian" — i.e., preclusive or coercive. Unitrin, Inc. v. American General Corp., 651 A.2d 1361 (Del. 1995).
Blasius Heightened Standard. If the Board takes actions for the primary purpose of impeding the exercise of the shareholder franchise — for example, manipulating the Board's size, delaying the annual meeting, or imposing procedural barriers designed to prevent shareholders from voting — the Board's conduct is subject to the heightened standard articulated in Blasius Industries, Inc. v. Atlas Corp., 564 A.2d 651 (Del. Ch. 1988). Under Blasius, the Board must demonstrate a "compelling justification" for its actions. This is a demanding standard, and courts have rarely sustained Board actions challenged under Blasius.
Implications for Settlement. The Board has broad authority under Delaware law to negotiate and enter into a cooperation agreement with Greystone, including agreements that involve expanding the Board and appointing new directors. Such decisions fall squarely within the Board's business judgment, provided that:
(a) The settlement is the product of a deliberative process in which the Board was fully informed of the relevant facts and circumstances;
(b) The Board received and considered the advice of legal counsel (Calderwood & Harkness LLP), financial advisors (Esterline Partners LLC), and proxy solicitors (Hargrove Advisory Group LLC);
(c) The Board made a reasonable assessment that the settlement terms are in the best interests of NTP and all its shareholders; and
(d) The settlement does not constitute an entrenchment device — i.e., it is not designed primarily to protect incumbent directors from removal or to insulate management from accountability.
Recent Delaware Chancery precedent supports the reasonableness of cooperation agreements in which target companies grant board representation to activist shareholders in exchange for standstill commitments and voting support. See, e.g., In re Saba Software, Inc. Stockholder Litigation, C.A. No. 10697-VCS (Del. Ch. 2017) (observing that cooperation agreements are a common and reasonable mechanism for resolving activist disputes); see also Third Point LLC v. Ruprecht, C.A. No. 9469-VCG (Del. Ch. 2014) (upholding the Board's decision to negotiate a settlement with an activist shareholder).
VI. EVALUATION OF GREYSTONE'S LIKELY PROXY CONTEST STRATEGY
A. Contest Mechanics and Timeline
If private engagement fails to produce a negotiated resolution, the most likely next step in Greystone's campaign is the commencement of a proxy contest at the 2023 AGM. The mechanics and timeline of such a contest are as follows:
Advance Notice Deadline. Under NTP's Bylaws, Greystone must file its advance notice of director nominations with the Corporate Secretary no later than April 12, 2023 — 90 calendar days prior to the July 12, 2023 AGM. As noted above, Greystone subsequently filed its advance notice on March 8, 2023, well ahead of the deadline, nominating Catherine Sinclair-Moreau and marshall Henning for two of the four Class I seats.
Proxy Statement Filing. If a proxy contest proceeds, Greystone will be required to file a preliminary proxy statement on Schedule 14A with the SEC. The SEC Staff will review and comment on the preliminary filing, after which Greystone will file a definitive proxy statement and commence solicitation. NTP will file its own definitive proxy statement in opposition. The dual-solicitation period — during which both the Company and Greystone are soliciting proxies from shareholders — is typically the most resource-intensive phase of a contested election.
Proxy Advisory Firms. The two principal proxy advisory firms — Thackeray Health IT ("ISS") and Westmark Solutions ("Tarrant Partners LLC") — will issue reports and voting recommendations in connection with the contested election. These recommendations are highly influential, particularly with passive and index fund shareholders. The ISS and Tarrant Partners LLC analysis is expected to focus on:
• Total Shareholder Return Performance. NTP's absolute and relative TSR performance over one-, three-, and five-year periods. NTP's underperformance relative to peers — particularly its approximately 16% decline from the 52-week high — may be cited as evidence supporting the case for Board change.
• Board Composition and Refreshment. The average tenure and skill composition of the Board, the diversity of the Board, and the Board's track record of director refreshment. Proxy advisory firms favor boards that demonstrate a commitment to ongoing refreshment and skills-based composition.
• Governance Practices. NTP's governance framework, including the classified board structure, supermajority removal provisions, and the absence of cumulative voting. ISS and Tarrant Partners LLC generally disfavor these provisions and may cite them as governance deficiencies in their reports.
• Responsiveness to Shareholder Engagement. The Board's willingness to engage constructively with Greystone will be evaluated. Proxy advisory firms tend to favor companies that demonstrate a genuine willingness to consider shareholder input, and they may view a refusal to engage as evidence of Board entrenchment.
• Nominee Quality. The qualifications and independence of Greystone's nominees will be compared against those of the incumbent Class I directors. As noted above, Greystone's nominees appear to be well-credentialed, which increases the risk that ISS or could recommend in favor of one or both of them.
Solicitation Costs. Greystone will bear the costs of its own solicitation, including legal fees, proxy solicitor fees, printing and mailing costs, and financial advisor fees. For a proxy contest involving a company of NTP's size, these costs typically range from $5 million to $15 million for each side. If Greystone prevails in the contest, it may seek reimbursement of its expenses from the Company — though the Board is under no legal obligation to provide such reimbursement.
Key Dates. The following estimated timeline applies if a proxy contest proceeds:
B. Greystone's Potential Nominees
As discussed in Section IV.B above, Greystone filed its advance notice on March 8, 2023, nominating Catherine "Kate" Sinclair-Moreau and marshall Henning for the Class I seats.
Based on our review of publicly available information and our knowledge of Greystone's track record, both nominees are experienced, credentialed professionals with relevant industry expertise. Ms. Sinclair-Moreau's background as former COO of Ridgeline Networks Inc. — a telecommunications infrastructure company — and her current board service at Brindoval Data Holdings Corp. (a cloud computing company) and Arden Communications Group Inc. (a fiber-to-the-home provider) provide her with directly relevant operational and governance experience. Mr. Henning's background as former CFO of Lakeshore Broadband Corp. and his expertise in capital allocation and financial strategy give him a profile that aligns with Greystone's emphasis on capital return and value creation.
These are the types of nominees that proxy advisory firms and institutional shareholders tend to view favorably. They are not "placeholder" nominees or activist insiders; they are independent professionals with genuine industry expertise. This raises the stakes of a proxy contest, because it will be more difficult for NTP to argue that the nominees are unqualified or lack independence.
We recommend that the Board and the Nominating and Governance Committee conduct a thorough review of the nominees' backgrounds, qualifications, and potential conflicts of interest. This review should include a check for any prior relationships between the nominees and Greystone, as well as an assessment of any compensation arrangements between Greystone and the nominees.
C. Institutional Shareholder Landscape
A critical factor in any proxy contest is the composition of the Company's shareholder base and the sentiment of its largest institutional holders. Based on NTP's m