US activist investor ValueAct given seat on Rolls-Royce board


Rolls-Royce has given US activist shareholder ValueAct a seat on its board in a move that will give the investor influence over the engine maker as its seeks to turn around its fortunes.

Rolls said Bradley Singer - a partner and chief operating officer at San Francisco-based fundValueAct - would become a member of the science and technology committee.

The decision to give an activist fund a seat on the board of a FTSE 100 firm is highly unusual, but comes after Rolls had lengthy talks with ValueAct, which is the group's largest shareholder, holding a 10.8% stake.

Ian Davis, chairman of Rolls-Royce, said: "Bradley Singer has an outstanding record as a business leader.

"He brings with him experience of public companies during periods of change, growth and significant financial outperformance, particularly in the US where Rolls-Royce has important business interests and a significant shareholder base."

Rolls and ValueAct have also signed a so-called relationship agreement, covering share dealings and other corporate governance matters.

Rolls has been slashing costs and restructuring after a string of profit warnings.

The group last month revealed that annual profits tumbled by 12% to £1.4 billion in 2015, but this was less than expected as the firm's cost-cutting has begun to take effect.

Rolls-Royce had warned over profits five times in two years, more recently hit by weak demand for corporate jet engines in emerging markets and tumbling crude oil prices impacting its marine operations.

Mr Singer said it was a "privilege" to join the Rolls board.

He added: "I have been deeply impressed with the senior leadership team and directors of Rolls-Royce and their commitment to improving their operations to match the company's world-class product portfolio and engineering capabilities."

ValueAct is a well-respected fund, managing 19 billion US dollars (£13.3 billion) of assets.

Rolls said Mr Singer's appointment follows the standard "rigorous selection process" that applies to all non-executive directors.

But he will not be considered an independent non-executive director, under UK corporate governance rules.

Mr Singer - a former investment banker at Goldman Sachs - has previously held roles including senior executive vice-president and chief financial officer of Discovery Communications, which owns the Discovery Channel and Animal Planet.

He is also a director of Motorola Solutions and a former director of Martha Stewart Living Omnimedia and Citizens Communications.

Rolls-Royce chief executive Warren East, who joined the firm last July, said in a strategic review last November that he would slash costs by between £150 million and £200 million a year.

Mr East added that he would scrap the current aerospace and land and sea divisional structure.

Rolls-Royce said the move will cut out a layer of senior management, with the group instead comprising five businesses from January - civil aerospace, defence aerospace, marine, nuclear and power systems.

The firm, which has major bases in Bristol and Derby, has previously announced 3,600 redundancies and will also axe 50 of its top 200 senior managers.

ValueAct was understood to be keen to sell Rolls-Royce's marine arm, which supplies engines to the oil business.

The firm's marine operations have slumped as oil prices have fallen some 70% since their peak in the summer of 2014.

Mr East, however, plans to keep the core of the group together and ValueAct is now said to be content to put its call for a sale of the marine business on hold while other cuts are made.