Aerojet Chairman Sues CEO Over Engine-Maker’s Board Battle (2)

Aerojet Rocketdyne Inc.’s chairman and three directors asked a judge to block the CEO and her allies on the board from using company resources in a fight for control of the rocket-engine maker.

A lawsuit unsealed Friday revealed long-simmering tensions between Chairman Warren Lichtenstein and Chief Executive Officer Eileen Drake who are at the heart of a proxy battle launched as U.S. antitrust regulators move to block Aerojet’s $4.4 billion takeover by Lockheed Martin Corp. The dispute has left the board split between warring factions.

The board fight surfaced as the unraveling merger complicates Lockheed’s efforts to develop hypersonic weapons -- a critical U.S. defense imperative because of recent Chinese innovations -- after the company planned to bring Aerojet’s propulsion systems in-house. The buyout also was seen as an early test of President Joe Biden’s push to focus more scrutiny on corporate mergers.

Lichtenstein paints the CEO and her allies as wrongfully using Aerojet resources to bolster their efforts to discredit his slate and win control. The board chairman founded Steel Partners Holding LP, which invested in Aerojet.

“None of the directors has the authority to tap the corporate treasury or the company’s resources, employees or advisors to advantage themselves in the election,” he said in the Delaware Chancery Court complaint. A judge set a Feb. 15 hearing on Lichtenstein’s request for a temporary restraining order.

Drake and three other directors filed a countersuit Friday, accusing their opponents of using “improper means” in the corporate clash. Drake claims a dispute arose with Lichtenstein during the Lockheed deal that resulted in her threatening to leave the company. She accused the chairman of leaking information about their “difficult working relationship,” which prompted Aerojet officials to launch an investigation.

Lichtenstein hoped to derail the investigation with his lawsuit, according to the countersuit. He and “collaborators” on the board intend to mount a “board-room coup” -- just as the company tries to salvage the Lockheed transaction, according to the countersuit.

“Mr. Lichtenstein, who is completely aligned with fellow shareholders, has operated with integrity and transparency throughout his tenure on the board,” said Charlotte Kiaie, a spokeswoman for the chairman. “We look forward to exposing any and all unsubstantiated allegations in due course.”

An Aerojet spokesperson said Lichtenstein’s suit is meritless. “The company believes Mr. Lichtenstein’s decision to cause Steel Partners to launch a disruptive proxy contest, aggressive litigation and other tactics at this time may ultimately be driven by his personal concerns and desire to secure his board position and gain leverage in the context of the company’s ongoing internal investigation,” the spokesperson said in an emailed statement.

The deal -- which calls for Aerojet investors to get $56 per share -- took a hit last month when the U.S. Federal Trade Commission sued to block the buyout. Regulators said if the acquisition was consummated, Lockheed could unfairly consolidate markets “critical to national security and defense” and harm competitors, according to an FTC release.

“Aerojet’s stockholders need a fully-functioning board to ensure compliance with the terms of the merger agreement, and a fully aligned management continuing to fulfill its fiduciary obligations to operate this company in the best interests of stockholders,” according to the countersuit. Lichtenstein wants to throw a wrench in the deal, the CEO and her allies claim.

The board chairman is telling industry insiders he’s “unhappy with Aerojet’s agreement to merge with Lockheed, he wants to replace the company’s CEO and he intends to take control of Aerojet if the merger falls through,” according to the countersuit.

The case is IN RE Aerojet Rocketdyne Holdings Inc., 2022-0127, Delaware Chancery Court (Wilmington).

(Updates with schedule for court hearing.)

To contact the reporters on this story:
Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net;
Julie Johnsson in Chicago at jjohnsson@bloomberg.net;
Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story:
Katia Porzecanski at kporzecansk1@bloomberg.net

Peter Blumberg, Joe Schneider

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