ValueAct Capital Bolsters Stake in Rolls-Royce
November 19 2015 - 10:10AM
Dow Jones News
LONDON—Activist investor ValueAct Capital Management LP
doubled-down on its big bet on Rolls-Royce Holdings PLC as its
stake in the British engine maker topped 10%.
ValueAct crossed the 10% reporting threshold on Nov. 18,
Rolls-Royce said Thursday in a regulatory announcement. ValueAct,
Rolls-Royce's largest investor, reached the new shareholder level a
week after the company issued another profit warning that caused
shares to slump.
The investor, which has had a smaller share in Rolls-Royce for
some time, crossed the 5% threshold in July.
Shares in the maker of engines for Boeing 787 Dreamliner
airliners and for the Airbus Group SE A380 superjumbo have fallen
about 24% since ValueAct's stake crossed 5%.
ValueAct now holds more than 183 million shares in Rolls-Royce.
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.
ValueAct declined to comment on the Rolls-Royce stake.
Rolls-Royce last week said its earnings outlook for next year
had worsened and that it may cut its dividend, prompting the worst
selloff in the company's stock in 15 years. The company has
struggled to deliver on cost-cutting efforts and been hit by
weakening demand for some civil aircraft engines, its largest
profit contributor.
Analysts worry more bad news may be ahead for Rolls-Royce, which
shed its affiliation with luxury car maker decades ago. "A further
reset of expectations may come in February," Bernstein Research
analyst Christian Laughlin said in a note on Thursday before
ValueAct's increased stake was made public.
Rolls-Royce Chief Executive Warren East last week said the
activist investor was seeking a seat on the London-based company's
board.
ValueAct had slowly been increasing its stake in Rolls-Royce
since crossing the 5% threshold even before the latest profit
warning. The larger stake doesn't translate into additional powers.
ValueAct already had enough shares to call a general shareholder
meeting.
"We are in regular contact with ValueAct, as we are with all our
major shareholders. We have a common interest in returning
Rolls-Royce to profitable growth," Rolls-Royce said Thursday.
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.
"They have some very good questions," Mr. East said a week ago,
without detailing them.
Mr. East is due to present details of an operational review to
investors next week. He began the process soon after joining
Rolls-Royce midyear. The review is aimed at improving long-term
profitability at the company and provide greater predictability
over its businesses, he has said.
However, Mr. East has said the effort wasn't a strategic review
to determine whether Rolls-Royce should exit activities such as its
marine engine business.
Write to Robert Wall at robert.wall@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 19, 2015 09:55 ET (14:55 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
Boeing (NYSE:BA)
Historical Stock Chart
From Aug 2024 to Sep 2024
Boeing (NYSE:BA)
Historical Stock Chart
From Sep 2023 to Sep 2024