(Bloomberg) -- The nasty boardroom battle for control of Aerojet Rocketdyne Holdings Inc. is about to move into the courtroom as a corporate raider faces off with the company’s chief executive officer over the fate of the last US rocket-engine maker.
A trial that starts Monday in Delaware Chancery Court is the result of a bitter proxy fight between Chief Executive Officer Eileen Drake, a retired US Army captain who flew Huey helicopters, and Aerojet’s chairman, Warren Lichtenstein, the founder of activist investor Steel Partners Holdings Inc.
Their feud over who should lead the company has been festering since February, when antitrust regulators sought to block the planned $4.4 billion sale of Aerojet to Lockheed Martin. The chairman wants to replace Drake with a former deputy, while the CEO’s faction claims Lichtenstein overstepped by making overtures to potential CEO candidates without consulting the board.
“It’s a mess,” said Larry Hamermesh, a University of Pennsylvania law professor who specializes in Delaware corporate cases. Instead of charting a path for Aerojet without Lockheed, board members are fighting each other, he said. “I’ve never seen this situation at a public company before.”
Allegations have been flying between the two camps for months.
Drake and her backers accuse Lichtenstein and his “collaborators” of undermining the failed merger, then nominating a slate of directors when an internal probe of his actions put his board seat in jeopardy, court filings show.
The chairman claims Drake is improperly using company resources to impugn him and isn’t up to the challenges of guiding Aerojet as a standalone entity, filings show. In February, Delaware Chancery Judge Lori Will ordered the CEO not to use company funds to back her board candidates.
Investor Vote
The judge must now decide at trial how and when investors can vote on competing slates of director candidates. Drake has proposed a special investors meeting for the vote on June 21, though that date has yet to be approved by a judge. Lichtenstein is pushing for a vote at the company’s regular annual meeting in mid-July.
While they’re bitter rivals now, Lichtenstein and Drake don’t seem to have competing visions of Aerojet’s future, with both apparently willing to sell the company, said Seth Seifman, an aerospace and defense analyst with JPMorgan Chase & Co.
“It’s not clear there is a big difference in the strategic outlook,” Seifman said.
Aerojet’s propulsion systems have powered almost every US missile system and many of its space programs since the dawn of the space age.
The company is relatively small, with $2.19 billion in revenue last year, but it remains a “pivotal” US defense contractor, said Loren Thompson, chief operating officer of the Lexington Institute, a think tank in Washington, D.C. Some of its products include the new generation of air-breathing hypersonic craft, capable of traveling five times the speed of sound, that are being designed to counter Chinese and Russian weapons.
Chopper Pilot
Drake, who earned $6.53 million in total compensation last year, could receive about $25 million if the company is sold, according to estimates in a government filing as of Dec. 31. She joined Aerojet in March 2015 as chief operating officer and was promoted to CEO four months later.
She previously held high-level positions at United Technologies Corp. and Ford Motor Co. She also was an Army helicopter pilot for seven years and commanded Fort Belvoir’s chopper base outside Washington. The unit based there is responsible for ferrying government and Pentagon VIPs around the East Coast. She left the Army in 1996.
Lichtenstein formed Steel Partners in 1990 and says its holdings have combined annual revenue of $3.6 billion. He’s carved out a reputation in the US and Japan as a fiery-tempered corporate raider who pushes to gain board seats so he can force companies to improve performances and maximize share prices.
In 2003, Lichtenstein took a hefty stake in United Industrial Corp, a pesticide maker and eventually became chairman. Four years later, he backed United’s sale to Textron Inc. for $1.1 billion. In Japan, Lichtenstein stirred controversy by taking positions in beer brewer Sapporo Holdings and condiments maker Bull-Dog Sauce Ltd., and then pressing for operational changes.
He also made headlines last year when he bought a Mediterranean-style Miami waterfront mansion owned by celebrity restaurateur Myles Chefetz for $15.5 million. In the past, he’s been described in court filings as living an “extravagant playboy lifestyle.”
Deal Collapsed
Lichtenstein’s dispute with Drake, who he recruited for Aerojet’s top job, was triggered by the failed Lockheed deal.
The CEO’s contingent alleges in court filings that Lichtenstein violated his legal duties to shareholders by leaking his growing unease as antitrust scrutiny of the merger intensified. The chairman wanted to seek other bidders for Aerojet and began “laying the groundwork” to remove the CEO when she refused to support the plan, they claim. The board launched an internal probe of Lichtenstein’s actions.
Shortly after the Federal Trade Commission sued to block the merger in January, Steel Partners -- one of Aerojet’s largest investors -- announced it was nominating a slate of directors to replace Drake and her backers on the board.
‘Weaponizing’ Probe
Aerojet’s chairman, however, takes Drake and her backers to task for “weaponizing” the internal probe, which he claims was done to sully his reputation and turn Aerojet investors against him, according to court filings.
Drake is “unfit to continue to lead the Company out of the hole she dug prior to the termination of the Lockheed Martin Corporation merger,” Lichtenstein said in a statement Monday. “Shareholders will finally be able to learn material details about these misdeeds and see the desperate measures Ms. Drake has used in her attempt to gain control of the Company.”
The CEO’s team sees it differently.
“Mr. Lichtenstein has waged a campaign of intimidation and misinformation,” Ray DiCamillo, one of Drake’s lawyers, said in an email. “We look forward to presenting the full story to the court.”
A winner won’t emerge until Aerojet shareholders cast board votes. For now, the bitter infighting shows no signs of abating.
“Like any war, the tension and anger takes on a life of its own,” the Lexington Institute’s Thompson said.
The case is IN RE Aerojet Rocketdyne Holdings Inc., 2022-0127, Delaware Chancery Court (Wilmington).
©2022 Bloomberg L.P.
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