Rolls-Royce eases break-up fears

The San Francisco-based ValueAct became Rolls’ largest shareholder last month when it snapped up a 5.4 per cent stake

Rolls-Royce’s new boss, Warren East, has played down fears that the US activist investor ValueAct is going to lead a break-up of the FTSE 100 engineering giant.

The San Francisco-based fund became Rolls’ largest shareholder last month when it snapped up a 5.4 per cent stake. Analysts believe it is likely to push for a seat on the company’s board and put pressure on it to accelerate a cost-cutting programme within its core aerospace division.

However, in a memo to staff, Mr East, who recently took over from John Rishton, said: “The activist shareholder has caused a lot of speculation in the press, some of which I understand appears concerning as it talks about break-ups and spin-offs.

“I suggest we engage with the activists rather than shy away, properly explain our plans and the opportunities, and get them aligned with our agenda.”

ValueAct is run by Jeffrey Ubben and manages more than $18bn (£11.6bn) in funds. It has forced changes at companies including Microsoft and Sara Lee.

Mr East and his finance director, David Smith, have already met with ValueAct.

“Whilst with some activist interventions such dramatic outcomes do indeed occur, mostly these people are simply capitalists seeking the opportunity of a business in some kind of transition,” Mr East added.