Activist hedge fund manager Ramius Capital Group is pushing for changes at network testing equipment manufacturer Tollgrade Communications Inc (NASDAQ: TLGD). In an SEC filing on May 18th, Ramius said that it believes it is time for fundamental changes in the Tollgrade’s direction. The hedge fund cited that the company lacks leadership with experience in telecommunications, lacks interest regarding financial performance, has poor operating performance, and made spendthrift capital investments.
Of significant concern for Ramius is the lack of relevant expertise among the company’s board of directors. “Apart from Mr. Ferrara, no other current Board member has direct experience in the telecom equipment industry, an industry in which the Company generates a vast majority of its revenues. Conversely, the Ramius Nominees have over 35 years of combined experience in the telecom equipment and services industries. We believe the experience of the Ramius Nominees would prove invaluable in addressing the issues facing the Company.” Ramius’ nominees include the hedge fund’s own Jeffrey Solomon, alongside Scott Chandler and Edward B Meyercord III of advisory service firms Franklin Court Partners and Council Rock Advisors, respectively.
On May 20th, as a counter-offer, Tollgrade announced that it would willing to elect a Ramius representative, along with two independent directors, one chosen by Ramius and the other by Tollgrade. Although there was no formal defense of the recent underperformance, Tollgrade stated in the letter that the company is in the correct strategic direction for long-term growth.
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