US hedge fund doubles stake in Rolls-Royce

Hedge Fund

A US activist hedge fund has turned the screw on Roll-Royce by nearly doubling its stake in the struggling aircraft engine maker to 10%.

California-based ValueAct has been pushing for change at Rolls-Royce since acquiring a 5.4% stake in the group in August. It wants the engineer to sell off its marine business to focus on producing engines for passenger planes.

ValueAct has asked for a seat on Rolls-Royce’s board but the approach has been rejected by the Derby-based manufacturer.

Last week, Rolls-Royce issued its fourth profit warning in a year and hinted that it could cut dividend payments, sending its shares plummeting. It blamed falling demand for corporate jets in Brazil, China and south-east Asia, a decline in maintenance and servicing revenues from its engines for large planes, and slower demand from energy industry customers in the wake of the oil price slump.

Rolls-Royce, which makes engines for the Airbus A380 superjumbos, has been betting on strong sales for wide-bodied long-haul aircraft and says that by 2020 half the world’s jumbo jets will be powered by its engines. However, the trend among leading airlines is towards narrow-body passenger planes, a market that Rolls-Royce abandoned in 2013 when it pulled out of a joint venture with rival Pratt & Whitney so it could focus on wide-bodied aircraft and the next generation of single-aisle short-haul planes that should follow the Airbus A320neo and Boeing 737 Max.

On top of this, the company faces bribery allegations and a Serious Fraud Office investigation. This week it brought in a leading law firm, Slaughter and May, to help it deal with the investigation, which was launched two years ago.

Powered by Guardian.co.ukThis article was written by Julia Kollewe, for theguardian.com on Thursday 19th November 2015 13.58 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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