Rolls-Royce rallies as activist hedge fund targets cost cuts

Shares in Rolls-Royce rose sharply, extending gains that began on Friday after it emerged that US hedge fund ValueAct has built a 5.4% stake in the aerospace and defence company.

On Monday, the Financial Times reported that ValueAct is urging Rolls-Royce to accelerate cost cuts in its core aerospace business. It cited sources as saying the fund is also likely to encourage an eventual sale of the company’s non-aerospace division when the board conducts a strategic review.

Brenda Kelly, head analyst at London Capital Group, said: “ValueAct, seen as an activist fund, are said to be looking at shoring up the main aerospace division and pushing for an offload in areas outside this civil aerospace area. The shares have really struggled this year so this injection of impetus will be welcome.”

Meanwhile, analysts at Whitman Howard said “long-term buyers will be pleased by the arrival of an active fund manager.”

At 1022 BST, Rolls-Royce shares were up 4.5% at 829.50p.