Rolls-Royce Names Activist Shareholder ValueAct to Board -- 2nd Update
March 02 2016 - 5:23AM
Dow Jones News
By Robert Wall
LONDON--Rolls-Royce Holdings PLC named the representative of
activist shareholder ValueAct Capital Management LP to its board on
Wednesday, though the British engine-maker vowed to stick to its
current strategy.
The group, one of the main suppliers of aircraft engines for
plane makers Airbus Group SE and Boeing Co., said Bradley Singer,
ValueAct's Chief Operating Officer, will join as a director with
immediate effect.
ValueAct last year became Rolls-Royce's largest shareholder and
now holds a 10.8% stake in the company.
Rolls-Royce Chairman Ian Davis said the presence of an activist
investment-fund in the boardroom won't trigger another review of
group strategy. Rolls-Royce is committed to being a "diversified
engine and power-systems business," Mr. Davis said.
The ValueAct representative would serve on the board as long as
ValueAct remained a major shareholder in the company, he said.
The appointment comes as Rolls-Royce Chief Executive Warren East
is set to complete a strategic review midsummer, Mr. Davis said. It
could lead to some disposals, though Mr. East has signaled that was
no plan for a thorough reshaping of Rolls-Royce's portfolio. As
well as jet engines, the group makes engines and power turbines for
the marine, defense, and energy sectors.
Mr. East recently completed an operational review that has led
to a streamlining of the organization and job cuts to restore
competitiveness.
Rolls-Royce has struggled under a series of profit warnings and
last month announced the first dividend cut in more than 20 years.
The company has seen demand weaken for some of its most profitable
products. The sharp drop in oil prices also has hit earnings at its
marine and power-systems operations.
Rolls-Royce said that ValueAct has committed not to raise its
stake beyond 12.5% and has signed up to a standstill agreement that
will run until the 2018 annual shareholder meeting. Under the pact,
ValueAct has agreed not to call for shareholder meetings, propose
mergers or changes to company strategy, nor to publicly criticize
the company.
The agreement is similar to one ValueAct has with 21st Century
Fox which nominated Jeffrey Ubben, the firm's chief executive, to
the media and entertainment group's board last year.
ValueAct has also agreed to vote its shares in support of the
board at Rolls-Royce's shareholder meetings this year and next, as
well as maintaining at least a 7.5% stake to retain its board
representation.
The appointment comes after months of talks between Rolls-Royce
and ValueAct which Mr. Davis characterized as "constructive" though
ValueAct hasn't made specific recommendations on the overhaul under
way at Rolls-Royce.
Mr. Singer would strengthen the company's ability to deal with
U.S. investors and bolsters its financial know-how, Mr. Davis said.
Mr. Singer previously was Chief Financial Officer of Discovery
Communications and American Tower Corp. while ValueAct has
experience of the aerospace sector through having had a stake in
aircraft electronics company Rockwell Collins Inc.
Mr. Davis said he consulted with other investors before Mr.
Singer was named to the board. Most backed the move. A small number
of British investors indicated some reluctance, he said.
Rolls-Royce has fallen out of favor with some British
institutional investors in recent months as its earnings have
fallen short of expectations. Neil Woodford, a highly regarded
British investment fund manager who held Rolls-Royce stock for
almost a decade, said last year that he lacked confidence in the
engine maker's near-term prospects, saying his CF Woodford Equity
Income Fund and the Woodford Patient Capital Trust fund had sold
their shares.
Mr. Singer, who also joins the Rolls-Royce board's science and
technology committee, is blocked from serving on the group's
nominations and governance committee, audit committee or
remuneration committee, the engine maker said.
Write to Robert Wall at robert.wall@wsj.com
(END) Dow Jones Newswires
March 02, 2016 05:08 ET (10:08 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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