BAE Shareholder Revolt Deepens as Invesco Demands Chairman Quit
BAE Systems Plc (BA/)’s biggest shareholder intensified its opposition by calling for the resignation of Chairman Dick Olver in the wake of the failed merger with European Aeronautic, Defence & Space Co.
Invesco Ltd. (IVZ), which which holds 13.4 percent of BAE shares, sent a letter to management in which it asked Olver to quit and also demanded the departure of independent director Peter Mason, a spokesman for the U.S. fund said today. BAE said its board remains “fully supportive” of its directors.
The letter escalates a rift between Europe’s largest defense company and its biggest shareholder, which publicly opposed the proposed merger with EADS, saying it made little strategic and financial sense. The companies scrapped the plan this month after failing to win backing from European governments, with Berlin in particular opposing the deal.
Even before the merger plan, Invesco had criticized BAE management and its use of cash, asking the company deploy more funds for buybacks and dividends instead of acquisitions, two people familiar with the correspondence said. BAE said today that it’s “in regular dialog with all our major investors and we listen carefully to the views of all our shareholders.”
BAE and Paris-based EADS had struggled to warm their investor base to the planned combination. EADS shares fell in the weeks after the proposal was unveiled on Sept. 12, and BAE investors voiced discontent over the prospect of a diluted portfolio and a lower dividend yield in future years.
Olver took over as BAE chairman in the middle of 2004 from Richard Evans, who retired. He previously worked at BP Plc. (BP/) After the merger plan broke down, Olver said that BAE would revert to its previous strategy. He expressed support for the management team under Chief Executive Officer Ian King and said that no personnel changes were planned.
BAE fell as much as 6.10 pence, or 2 percent, to 307.2 pence, and traded at 307.3 pence as of 12:22 p.m. in London, valuing the company at about 10 billion pounds ($16 billion). The Financial Times earlier reported that Invesco had sent a letter demanding senior management changes at BAE.
Separately, ShareSoc, a London-based group representing individual shareholders, called for Olver and King to step down “as soon as possible” or risk being opposed at next year’s annual general meeting. The group, with 2,500 members, called for the resignations because of the EADS merger talks.
“It was never very clear what benefit BAE shareholders would get from the deal,” ShareSoc Chairman Roger Lawson said in a statement. “There has been a failure of ’shareholder engagement.’”
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