Rocket system manufacturer Aerojet Rocketdyne Holdings Inc. finds itself in a proxy fight waged by its chairman, Warren Lichtenstein, that, once concluded, will determine who controls the company’s board.

The outcome will have to wait, for now. The company’s annual meeting date when shareholder will elect directors has yet to be set.
Aerojet Rocketdyne Chief Executive Eileen Drake and other executives continue to engage with Lichtenstein in a battle for the votes of shareholders until the meeting is held and one side’s slate of directors is put into power.

Lichtenstein, who founded New York-based Steel Partners in 1990 as a private investment firm that has since turned into a publicly traded holding company with interests in energy, defense, banking and supply chain management, controls 5.2% of the company’s stock.
The publicly traded Aerojet, based in El Segundo, does business with companies such as Raytheon Technologies, Boeing Co. and Lockheed Martin Technologies — the latter of which was set to acquire Aerojet in a deal worth $4.4 billion until the Federal Trade Commission moved to block the transaction.

The FTC challenge led to Lockheed terminating its offer for Aerojet on Feb. 13, which set in motion the proxy fight.
In February, Steel Partners nominated a seven-candidate slate for election to Aerojet’s seven-member board at this year’s annual meeting. The slate included four incumbents.
Steel Partners said in a statement that it felt compelled to nominate its candidates after the FTC filed its lawsuit to block the Lockheed transaction.

“We believe our nomination was a justifiable response to the company having a gridlocked board and certain officers and directors recently taking actions without board consultation, including spending shareholders’ capital on high-priced advisors and issuing unauthorized material announcements in the name of the company,” Lichtenstein said in a statement.
Not long after Steel Partners made its nominations public, Aerojet announced a pre-existing investigation into Lichtenstein for alleged misconduct.

Aerojet said in a statement that the investigation was being conducted under “the oversight of a committee of independent directors of the company, three of whom were not included in (Steel Partners’) proposed slate of directors.”
Aerojet noted that the investigation was not related to its operations or financial reporting.

Details of Lichtenstein’s alleged misconduct have not been shared outside of a statement from Lichtenstein that said, “The focus of the inquiry, in substance, pertains to disagreements between Mr. Lichtenstein and Ms. Drake regarding Mr. Lichtenstein’s repeated requests that management prepare for a standalone future and Ms. Drake’s concerns that she might be replaced.”

Aerojet has since put forth its own slate of directors to counter Steel’s, which includes the three current directors — Gen. Kevin Chilton (Ret.), Thomas Corcoran and Gen. Lance Lord (Ret.), and nominees Gail Baker, Marion Blakey, Maj. Gen. Charles Bolden Jr. (Ret.) and Deborah Lee James.

The company argued in a statement that Lichtenstein’s initiation of a proxy fight “is driven by his personal concerns – to secure his board position and gain leverage in the context of the company’s internal investigation.”

In a statement, Drake and Chilton directed seven questions toward shareholders such as:
“Why is Mr. Lichtenstein delaying and refusing to set an annual meeting date, which is the only way shareholders can choose the company’s leaders?”

Another question in the letter to shareholders was: “Why did Mr. Lichtenstein and his three board allies become so critical of the company’s performance only after the board launched its investigation into Mr. Lichtenstein’s conduct? Will the results of the Lichtenstein investigation be disclosed?”

Simultaneous litigation

Steel Partners and Aerojet also have become embroiled in litigation in the Delaware Court of Chancery that granted a temporary restraining order prohibiting Drake, Corcoran, Chilton and Lord from using company resources to advance their personal positions in the proxy fight while the board is deadlocked over the director candidates.

The court also prohibited any “Aerojet Rocketdyne employee, director, advisor or agent from issuing any public statement, press release or corporate disclosure in the name of the company in support of any candidate standing for election at the annual meeting without prior written approval from the board or a duly authorized committee of the board,” according to a statement.

For this reason, Aerojet Rocketdyne did not speak on the record with the Business Journal. Attempts to speak with a Steel Partners representative were unsuccessful.
A later court ruling found that Drake and her colleagues failed to comply with the temporary restraining order, according to a statement from Steel Partners. The statement added: “The court also rejected the lopsided proposal by Ms. Drake and her boardroom allies to conduct Aerojet Rocketdyne’s election contest without the consent of a majority of the board.”

A court trial is scheduled for late May.
Meanwhile, the company’s shares have only recovered a portion of their price after a drop that occurred when the FTC blocked the Lockheed transaction.
As for the decision to scuttle the proposed transaction, FTC Bureau of Competition Director Holly Vedova said this in a statement: “The acquisition would have eliminated the country’s last independent supplier of key missile propulsion inputs and given Lockheed the ability to cut off its competitors’ access to these critical components. Simply put, the deal would have resulted in higher prices and diminished quality and innovation for programs that are critical to national security.”

In a Feb. 18 equity research report published by Jefferies Group, the investment firm stated that “the fact that the FTC moved to block the deal points to the critical nature of (Aerojet’s) technology and the competitive risk of (Lockheed) controlling the company.”