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Rolls-Royce (LON:RR), the UK-based engineering group, is under pressure to give its biggest shareholder board representation, The Sunday Telegraph reported.

According to people with close links to the business, at least two meetings have been held between Rolls-Royce and activist investor ValueAct, and the US-based fund has not hidden its appetite for a board seat, the report said.

Rolls-Royce’s management team has concerns about the needs of its customers and other investors being sidelined and has thus resisted ValueAct, which had built up an almost 5.5% holding by July this year, the item reported. The executives believe Rolls-Royce’s best interests would not be best served by giving ValueAct board representation and think ValueAct’s activist status may not be compatible with a board seat, the report said.

ValueAct is eager to secure a board seat but does not feel strongly enough about the issue to force an extraordinary general meeting where it can be put to the vote, the report said.

Rolls-Royce has put out four profit warnings during 18 months and is scheduled to release its quarterly results on Thursday, 12 November, the report noted. A company spokesperson confirmed several conversations had been held with ValueAct but did not elaborate.

Warren East, chief executive of Rolls-Royce, is believed to have warmed to ValueAct since initially disparaging the fund as “opportunists” in a critical memo to employees, the report said. He now considers ValueAct to be relatively benign, in comparison with most activists, but remains uneasy about the fund’s dominant stakeholding, according to sources cited in the piece.

Sunday Telegraph