Activist investor ValueAct Capital Management LP has taken a
more than 5% stake in Rolls-Royce Holdings PLC after the British
engine maker suffered a series of profit warnings that has weighed
on its stock.
ValueAct crossed the 5% reporting threshold on July 29,
Rolls-Royce said in a regulatory announcement. The investor, which
has had a smaller share in Rolls-Royce for some time, now holds
5.44% of the stock, the regulatory notice said.
Shares in London-based Rolls-Royce spiked more than 6% on the
news.
"We look forward to engaging with ValueAct, just as we do with
all investors," a Rolls-Royce spokesman said. "We welcome any
investor who recognizes the long-term value of our business," he
said.
The San Francisco-based hedge fund seeks to add long-term value
to companies, working behind the scenes with management rather than
seeking to fight publicly like many activists.
Founded by former Fidelity stock picker Jeffrey Ubben, ValueAct
gained attention in 2013 when it took a board seat at Microsoft
Corp. though it held less than 1% of the stock. It was the first
time the software giant appointed an activist shareholder to its
board. The investor this year also took a stake in oil-field
services provider Baker Hughes, which Halliburton Co. is
buying.
Rolls-Royce has been struggling with headwinds in its marine
engine business as demand for ships has ebbed because of the fall
in crude prices. Profitability at the crucial aerospace unit also
has been under pressure, in part owing to weakening demand for one
of its most profitable widebody engines.
Rolls-Royce on Thursday reported a 32% fall in pretax profit to
£ 439 million ($695 million) and a 3% fall in sales. Chief
executive Warren East, in the job less than a month, is undertaking
an operational review of the business. He said on Thursday that he
sought to speed transformation efforts.
Rolls-Royce has faced some calls to focus on its aerospace
activities and shed some other businesses. Mr. East said he's not
planning to shake up the company's strategy.
Rolls-Royce chairman Ian Davis said in April, when he named Mr.
East to replace John Rishton, that the board was comfortable with
the strategic direction of the company.
Write to Robert Wall at robert.wall@wsj.com
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