Rolls-Royce Told: Refresh Board, Consider Power Systems Sale

The British engineering company's largest shareholder says its incoming chair should look for fresh thinking.

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Rolls-Royce Holdings plc should consider the future of its ship and train power systems business and focus on aerospace and defense, the British engineering group’s largest shareholder said Monday, Aug. 30.

The advice came from Jonathan Eng, a portfolio manager at Los Angeles-based Causeway Capital Management LLC, in an interview with London’s Financial Times. Causeway Capital has a stake of just under 9% in the company.

Eng said he was still undecided about whether a review should ultimately result in a sale, but argued the company should conduct a review of the unit in the next three years.

“With a stroke they can become an aerospace and defense and they can fix their balance sheet issue,” he was quoted as saying.

Eng also called on the aero-engine maker’s incoming chair Anita Frew to “refresh” the Rolls-Royce board, when she takes up the role in October, suggesting that some fresh thinking was needed and that the company’s current board might not have the right expertise to tackle the decarbonization challenge.

Frew, 64, will be Rolls-Royce’s first female chair. She currently chairs specialty chemicals company Croda International plc and chairs its nomination committee as well as serving as an independent director of mining and resources group BHP Group plc.

She has previous board experience in a wide range of industries from financial services to media, according to Boardex, a relationship mapping service that is a sister company of The Deal.

The Scot served as deputy chairman of Lloyds banking Group plc until May 2020, and has also sat, in past roles, as a non-executive director of Aberdeen Asset Management plc, (now Abrdn plc), Northumbrian Water Ltd. as well as the chemicals company Victrex plc, engineering and fluid control technologies company IMI plc and the newspaper publisher Archant Community Media Ltd.

For all her experience, Frew has a tough job ahead of her as Rolls-Royce struggles to recover not only from the effects of the Covid-19 pandemic on its civil aerospace business but also from troubles in its jet engine manufacturing operations that pre-date the coronavirus crisis.

Rolls-Royce’s current chair, Ian Davis, has been working with CEO Warren East to turn the company around, cutting costs, rationalizing staff numbers, and selling off assets.

Rolls-Royce said in early August it agreed to sell Norway’s ship’s engine supplier Bergen Engines AS to British engineering group Langley Holdings plc for €70 million ($83 million); and confirmed it is in exclusive talks to sell its Spanish aircraft engine-maker Industria de Turbo Propulsores SA, or ITP Aero, to a consortium led by Bain Capital LLC.

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