Rolls-Royce shareholders split over giving ValueAct a board seat
Shareholders in Rolls-Royce (LON:RR) appear to be divided over whether activist hedge fund ValueAct should be given the board representation it is seeking, The Sunday Telegraph reported.
The article quoted one unidentified investor who said the 10% stake built up by ValueAct in the UK-based engine manufacturer is not sufficient for the activist to be able to demand a seat on the board of a major public company.
Another institutional investor also felt 10% was not high enough to merit board representation, the report said.
A third major shareholder was quoted stating that they would accept the situation if ValueAct were to be given a seat on the board. They added that they did not think the activist’s priorities lie in improving Rolls-Royce’s growth prospects but rather in extracting shorter-term value.
Other Rolls-Royce investors are known to back ValueAct’s efforts to secure a board seat, the report said.
ValueAct’s request is currently under consideration by Rolls-Royce, the item reported, adding that the engine maker described talks between the two sides as “constructive”.
Meanwhile, The Sunday Times reported that developments at Rolls-Royce are being closely followed by the UK government’s Shareholder Executive. The government’s concern has been triggered by California-based ValueAct’s recent increase in its Rolls-Royce shareholding to 10%, the report said. It noted that the company’s Articles of Association prevent any overseas investor from owning a stake in excess of 15%.
The government has a “golden share” in Rolls-Royce, which entitles the state to control over major strategic moves such as key asset sales, a merger or the hiring of a non-British chief executive, the report said.
The Shareholder Executive, which manages the government’s corporate holdings, is also keen to determine whether ValueAct might be in concert with other Rolls-Royce shareholders, which would push its control of the business above the 15% level, the item reported. There is no suggestion so far that ValueAct is working with any other such party, the report said.
The government is also preparing for the possibility of major asset sales, the item reported, noting that ValueAct is thought to be eager for Rolls-Royce to sell its marine-engines unit and focus purely on its aerospace business.
Sunday Telegraph, Sunday Times