TheChek News Flow

Rolls-Royce [LON:RR] chairman Ian Davis said the appointment of ValueAct chief operating officer Bradley Singer as a board member does not signal an impending break-up of the FTSE-100 engineering group’s board, The Guardian reported. Davis said ValueAct has not pushed for a break-up and Rolls-Royce’s board will not break the company up.

ValueAct’s agreement with Rolls-Royce stipulates that the investment firm must relinquish its board seat if it builds a stake of more than 12.5% or reduces its shareholding below 7.5%, the item noted. ValueAct will not be able to call shareholder meetings or propose a takeover of Rolls or a merger.

The activist investor will also be prohibited from proposing strategic or managerial changes and from criticising Rolls-Royce in public, the article said. ValueAct is also bound to vote in favour of the board’s proposals at AGMs, the report added.

A report in The Times said Davis conceded that some shareholders have voiced their "unease" regarding the appointment of Singer.

One leading fund manager quoted in the report said shareholders had concerns about the appointment. The fund manager said they were not in favour of "representational" directors, arguing that the board should represent all shareholders.

Background:

ValueAct disclosed on 19 November that it had increased its stake in Rolls-Royce to 10%.

Several reports over the past six months have said ValueAct has urged Rolls-Royce to accelerate its cost reduction strategy and that the activist investor may at a later date push for a sale of Rolls-Royce’s non-aerospace businesses.

Rolls-Royce’s share price was 3p down at 680p in London yesterday (2 March) following news of Singer’s appointment, giving the company a market capitalisation of GBP 12.50bn (EUR 16.20bn).