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Rolls-Royce in move to appoint main shareholder to its board

By Roger Baird

Rolls-Royce is in talks with a US activist shareholder about taking a seat on its board as the engine maker bids to recover from plunging profits.

The FTSE 100 firm said it had held talks with San Francisco-based fund ValueAct as it slashes costs and restructures its business. ValueAct is the largest shareholder in Rolls-Royce, holding a 10% stake.

A spokesman for Rolls-Royce said: "We're engaged in constructive discussions with ValueAct and no decision has yet been taken by the board."

The talks come after Rolls-Royce last week revealed annual profits tumbled by 12% to £1.4bn in 2015, but this was less than expected as the firm's cost-cutting begins to take effect.

The company 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.

Shares in Rolls-Royce lifted more than 5% on the ValueAct talks, which would hand a seat on the board to the respected fund.

ValueAct manages $19bn (£13.3bn) of assets.

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

Mr East added 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 comprising civil aerospace, defence aerospace, marine, nuclear and power systems.

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