Aerojet Rocketdyne Executive Chairman Warren Lichtenstein Highlights 10 Irrefutable Facts Ahead of Special Meeting
June 21 2022 - 08:00AM
Business Wire
Contends Recent Report from ISS is Devoid of
Substantive Analysis of the Respective Slates’ Business
Assessments, Nominees, CEO Candidates and Strategic Plans
Notes ISS Clearly Lacks Understanding of the
Sector and Ability to Analyze Aerojet Rocketdyne’s Business
Shares Telling Side-by-Side Comparison of
the Lichtenstein Value Proposition vs. the Drake Value
Proposition
Urges Shareholders to Vote on the
GREEN Proxy Card to Elect Chairman’s
Refreshed Slate of Eight Highly Qualified Nominees, Which Has the
Right CEO and a Superior Plan for Value Creation
Aerojet Rocketdyne Holdings, Inc. (NYSE: AJRD) (“Aerojet
Rocketdyne” or the “Company”) Executive Chairman Warren
Lichtenstein, who collectively with his affiliates and the
participants in his solicitation owns approximately 5.6% of the
Company's outstanding shares, issued the below statement in
connection with the recent report from Institutional Shareholder
Services, Inc. (“ISS”) and his campaign to elect a recently
refreshed slate of highly qualified candidates to the Company’s
Board of Directors (the “Board”) at the special meeting of
shareholders (the “Special Meeting”) set for June 30, 2022:
“It is unfortunate that ISS issued a report that lacks any
substantive analysis of the respective slates’ business
assessments, credentials, CEO candidates and strategic plans. ISS
clearly lacks the ability to evaluate the business aspects of
companies in Aerojet Rocketdyne’s sector. Clients who have capital
at risk and were looking for informed voting perspectives deserved
better than an unjustifiably one-sided report that reads like a
highly personalized newspaper editorial. We take solace in the fact
that Aerojet Rocketdyne has a shareholder base that is primarily
comprised of thoughtful institutional funds that make independent
voting decisions – rather than outsourcing voting completely to
ISS.
My fellow nominees and I urge all Aerojet
Rocketdyne shareholders to start focusing on the 10 facts that
appear to be falling through the cracks amidst all the noise of
this contest. A review of these irrefutable facts should
validate that our slate has the credibility, CEO candidate and
value creation strategy to earn support at the Special Meeting. In
contrast, Eileen Drake has not issued a detailed plan and refuses
to align with half the Board on pre-releasing results ahead of the
Special Meeting, so shareholders can know if the Company’s
financial and operating performance is still deteriorating as it
did in fiscal year 2021. I believe the second quarter’s revenues,
earnings and cash flows are trending negative due to continued
delivery and production delays linked to employee attrition and
operational lapses. The obvious conclusion is that we need to go
back to the basics and start blocking and tackling the operational
issues facing the Company. Our CEO candidate, Mark Tucker, is
perfectly suited to do this. Ms. Drake is not. Additionally, Ms.
Drake’s reluctance to provide transparency ahead of a critical vote
– and after being found to have acted unlawfully and misleadingly
by the Delaware court – should be a flashing red light for
shareholders considering handing the Company over to her.”
THE 10 CRITICAL FACTS
FOR SHAREHOLDERS
- FACT: After the Lockheed Martin
Corporation deal was announced in December 2020, Ms. Drake and her
boardroom allies downplayed public regulatory headwinds and ignored
documented requests for comprehensive contingency planning. Ms.
Drake did not provide the Board with a formal contingency plan
until December 2021. That left the Company ill-prepared when the
deal was challenged by the Federal Trade Commission in January 2022
and terminated the following month.
- FACT: During fiscal year
2021, the Company’s key customers expressed frustration with
management’s inability to meet production timelines and provide
on-time delivery. Over the past 18 months, the concerns of
customers such as Boeing and Raytheon have spilled into the public
domain. This is a major threat to shareholder value given that
Aerojet Rocketdyne generates 90% of its revenue from a half-dozen
customers.
- FACT: Starting in the spring of
2021, Mr. Lichtenstein was sidelined because Ms. Drake initiated an
internal investigation (which ultimately found no breach of
fiduciary duty or violation of law) into his transaction-related
conduct. Mr. Lichtenstein was prevented from accessing
normal-course information and troubleshooting issues that were
eroding the Company’s financial and operational foundation. The
reality is Mr. Lichtenstein was investigated for engaging in
normal-course contingency planning that Ms. Drake refused to take
on herself because of her focus on obtaining a more than $25
million change-in-control payment.
- FACT: During fiscal year
2021, the Company burned through cash at an alarming rate.
Although Aerojet Rocketdyne reported $162 million in free cash flow
in 2021, $100 million of that was from a one-time CARES Act
payment. In reality, the Company only generated $62 million in free
cash flow for the year – a startling 79.9%
decline. These negative trends continue to this day –
essentially halfway through 2022.
- FACT: During fiscal year
2021, several of the Company’s programs in its Defense and Space
units have gone from “in the black” to deeply “in the red.”
Underperforming business units have been the root of negative cash
flow and unhappy customers. We fear this underperformance is only
spreading under Ms. Drake while the Board is gridlocked and she has
no real oversight. Again, these disturbing trends continue to the
present.
- FACT: The Drake slate
has not been honest with shareholders about the financial and
operational deterioration that has set in at Aerojet
Rocketdyne. Throughout their campaign, Ms. Drake and her allies
have not acknowledged – in any public communication – the
substantive business issues that are threatening shareholder value.
Allowing Ms. Drake to operate under the “oversight” of her own
hand-picked Board will not remedy this situation.
- FACT: The Drake slate
has not provided shareholders with a detailed plan for fixing the
business and producing long-term value. In their recent
investor presentation, Ms. Drake and her allies devoted a single
slide to a forward-looking plan. In contrast, our slate has
released a comprehensive strategy for repairing issues and
delivering at least $65 per share in value within three years.
- FACT: The Delaware Court
of Chancery recently found that Ms. Drake acted unlawfully by
misusing the Company’s resources to support her takeover efforts –
in violation of a temporary restraining order. We cannot find
any other example of a current CEO who has been rebuked in such a
manner by the preeminent business court in the country. Indeed, Ms.
Drake’s conduct and the corresponding ruling demonstrate she lacks
the credibility to continue running Aerojet Rocketdyne.
- FACT: Ms. Drake and her
boardroom allies have to date not committed to pre-release
financial results for the first five months of the year ahead of
the Special Meeting. The Chairman’s slate believes the
Company’s shareholders deserve to know whether management’s targets
for revenue, earnings, cash flow and other key metrics are being
achieved. In our view, transparency around these metrics is
especially important following the deterioration of the business in
fiscal year 2021 and continued decline in 2022.
- FACT: If Ms. Drake is
allowed to prevail at the Special Meeting, she will have
self-selected the Board that is supposed to objectively oversee her
compensation, performance and strategic decisions. We cannot
think of a worse foundation for good governance than allowing Ms.
Drake – who has violated a court order and misused corporate
resources – to pick her overseers. Conversely, our slate has
committed to admittedly long overdue governance enhancements that
include eliminating the Executive Chairman role, appointing a Lead
Independent Director and overhauling committee charters.
THE DISTINCT VALUE
PROPOSITIONS
The Key Questions
Drake
Lichtenstein
Top shareholder?
No
Yes
Trustworthy with shareholders’
resources?
No
Yes
Has made open market purchases?
No
Yes
Called for robust contingency plan
throughout 2021?
No
Yes
Has large change-in-control payment?
Yes
No
Has compensation aligned with shareholder
value?
No
Yes
Has shared a detailed strategy?
No
Yes
Has shared a detailed business
assessment?
No
Yes
Has a slate primarily comprised of new
candidates?
No
Yes
Has experience completing large
transactions?
No
Yes
Was recently willing to take a large
payment to leave?
Yes
No
***
Mr. Lichtenstein and new CEO candidate Mark
Tucker have issued a detailed presentation that diagnoses Aerojet
Rocketdyne’s vulnerabilities and outlines a fix-and-repair plan
that targets at least $65 per share within three years:
https://saveaerojet.com/wp-content/uploads/2022/06/Investor-Presentation.pdf.
***
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