Defence

Inside the alleged “coup in the boardroom” at Aerojet Rocketdyne – Breaking Defense Breaking Defense

Aerojet’s advanced production facilities in Huntsville, Alabama (Aerojet Rocketdyne)

WASHINGTON: The tension between Aerojet Rocketdyne Management has now grown into a full-blown legal battle for the company’s future as its CEO and allies on the board seek to remove the firm’s executive chairman as a countermeasure to what they describe as a “coup in the boardroom”.

Fighting lines were held between Aerojet CEO Eileen Drake and its executive chairman Warren Liechtenstein, whose Steel Partners Holdings LP owns 4.9% of the company. Both have three allies on the eight-member board of directors, which has baffled him and filed lawsuits against the rival faction.

At stake is the future of Aerojet Rocketdyne, a company the government considers important to America’s defense industry because of its status as the sole independent manufacturer of solid-state rocket engines and, in some cases, the sole supplier of key components for missiles and missiles and hypersonic weapons. . This story is based on legal material reviewed by Breaking Defense.

During today’s hearing, Judge Fr.The Delaware Chancellery has announced its intention to approve a request from Liechtenstein on February 7 for a temporary ban on Drake and her cohort – Kevin Chilton, Thomas Corcoran and Lance Lord – effectively preventing them from speaking on behalf of Aerojet or using its resources in the upcoming election. advice that will determine the direction of the company.

“Half of the evenly divided council cannot act on behalf of the campaign or use its resources to discredit the other half in the election campaign,” Liechtenstein’s complaint said. “None of the directors should use the corporate treasury to sway shareholders’ votes in their favor.”

Drake and three other board members filed a counterclaim on Feb. 11, claiming that Liechtenstein and his associates – James Henderson, Audrey McNeef and Martin Turchin – staged a “coup in the boardroom” seeking to dismiss Drake and secure Liechtenstein’s place in Liechtenstein. Ongoing internal investigation.

The complaint alleges that Liechtenstein and its allies violated their trust by launching a proxy contest while the now defunct Aerojet merger of Lockheed Martin was under consideration and bypassed the company’s management procedures.

Eventually, Drake seeks a court decision to remove Liechtenstein from the post of Aerojet director and appoint a “special committee” of Chilton, Lord and Carcoran, three of her supporters, to break the deadlock on the board and manage the company’s response to the proxy competition.

An Aerojet Rocketdyne spokeswoman did not immediately respond to a request for comment. A Steel Partners spokeswoman declined to comment.

Relationships are “stretched”

Aerojet’s internal power struggle went public after the Federal Trade Commission filed a lawsuit on January 25 to block Lockheed’s proposed $ 4.4 billion acquisition of Aerojet, leading to Lockheed termination of the transaction on Sunday.

However, both complaints clearly show that the potential merger with Lockheed has been a long-standing source of tension between Drake and Liechtenstein since the deal was concluded in 2020.

“During negotiations with Lockheed, Mr. Liechtenstein pressured Ms. Drake and her management team to conclude a possible deal and negotiate other convenient terms,” ​​Liechtenstein’s complaint said.

However, Drake refused and allegedly threatened to leave the company and take the management team with him if Liechtenstein did not give up. “Eventually, the company and Lockheed entered into a merger agreement, but relations between Mr. Liechtenstein and Ms. Drake became strained,” Liechtenstein’s complaint said.

Drake’s complaint alleges that Liechtenstein fought against the merger without providing a “viable alternative” and that since the deal was announced in December 2020, it has potentially violated the merger agreement many times, telling unnamed industry figures that it opposes deal and will seek to dismiss Drake and take over as CEO Lockheed failed to take over.

“If Mr. Liechtenstein did not comply with the Council’s directive to stop unauthorized communications regarding the merger, his conduct was reported to the full Council. In response, six non-executive directors of the Board unanimously authorized an independent investigation led by a third-party law firm, ”Drake’s complaint said.

“Instead of allowing an independent investigation to proceed, Mr Liechtenstein sought to ensure his renaming to the Aerojet board and thus avoid any consequences of the investigation.”

On January 28, just three days after the FTC announced its lawsuit, Lichtenstein’s Steel Partners proposed a new list of directors that excluded Drake, Lord, Chilton and Corcoran – a move that Liechtenstein said would better position Aerojet as a separate company. if the merger falls. through.

Aerojet in response issued a press release that revealed that Liechtenstein was the subject of an internal investigation and accused it of taking steps to secure its position on the board.

Since then, the Aerojet board has tried to meet several times, most recently on February 4th. The Drake faction proposed a series of resolutions that would put Lord, Chilton and Corcaran in charge of managing the company’s response to the proxy, and the Liechtenstein faction proposed its own resolutions that would force the council to remain neutral.

None of the proposals was able to garner a majority, and two factions filed a lawsuit the following week.

What’s next?

Sources who spoke with Breaking Defense earlier this month said Aerojet’s power struggle is likely to be resolved at the company’s annual shareholders’ meeting, which usually takes place in May. However, the date of this year’s meeting has not been set, and it is unclear whether the council will be able to gather a majority of votes to set a date.

Another question is whether Aerojet will be looking for another buyer after the release of Lockheed, and which company could successfully acquire Aerojet, as shown by the Biden administration it will be enable antitrust regulators to more rigorously scrutinize mergers and acquisitions in the defense sector.

Today the Ministry of Defense released a report on the state of competition in the defense-industrial base, who warned of “substantial” consolidation at the highest levels. The current state of the game makes “careful atteThe Department of Defense is considering any necessary further mergers, ”the White House said in a statement, adding that the Pentagon is expected to support the recommendations of the FTC and the Department of Justice if the merger threatens national security interests.

However, Breaking Defense analysts said there are likely buyers who are will not lead to the same considerations of vertical integration as Lockheed Martin.

Byron Callan, an aerospace and defense analyst at Capital Alpha Partners, said in January that a defense technology company such as Leidos or L3Harris could potentially acquire Aerojet without being marked by antitrust organizations. Lauren Thompson, a security consultant who worked with Aerojet, had previously pointed to private equity as another potential buyer.



https://breakingdefense.com/2022/02/inside-the-alleged-boardroom-coup-at-aerojet-rocketdyne/ Inside the alleged “coup in the boardroom” at Aerojet Rocketdyne – Breaking Defense Breaking Defense

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