Another Good Reason to Hold BAE Systems plc (BA)

BAE Systems PLC (ADR) (OTCBB:BAESY)LONDON — According to weekend newspaper reports, Sir Roger Carr — currently chairman of Centrica — is being lined up as the next chairman of BAE Systems plc (LON:BA). If true, it will be another good reason to hold the high-yielding shares.

The current incumbent, Dick Olver, is expected to step down this year, with more than a little push from shareholders after BAE’s plan to merger with Airbus manufacturer EADS fell apart. Fund manager Neil Woodford of Invesco Perpetual, BAE’s largest shareholder with 13%, campaigned for Olver to go and is said to support Sir Roger’s candidature.

What will this mean for BAE Systems plc (LON:BA) investors? I make three predictions.

Confidence and clarity
Sir Roger is an eminent City grandee, currently president of the Confederation of British Industry and deputy chairman of the Bank of England. He is outspoken, on topics such as U.K. energy policy, the U.K.’s role in Europe and executive pay, so BAE Systems plc (LON:BA) will have a louder and more confident public voice than recently. That should embolden management to take proactive measures to address the company’s weak markets, too. Olver and CEO Ian King are damaged goods in the wake of the EADS debacle.

Don’t be surprised if there’s a good shake-up of the boardroom, too. Indeed, King may not be among those celebrating.

A big deal?
Sir Roger was chairman of iconic chocolate brand Cadbury when it succumbed to a controversial £11 billion bid from Kraft, and he was chairman of Thames Water when it was sold to RWE for £5 billion. With his extensive connections and openness to big deals at the right price, it’s not inconceivable that the EADS merger could resurface.

That deal was vehemently opposed by Neil Woodford, but Invesco is also a shareholder in EADS and, with the right price and structure, attitudes could change. At least another time around, BAE Systems plc (LON:BA) shareholders could expect to receive proper value.

To buy, or not to buy
Woodford also savaged BAE Systems plc (LON:BA)’s track record of over-paying for acquisitions, and called for the company to concentrate on shareholder value rather than growth.

It can be taken as read that Sir Roger will focus on shareholder value. But his reputation was built on M&A: in the 1980s and 1990s he worked for, and subsequently became CEO of, Williams Holdings as it grew from a car dealership to a FTSE 100 conglomerate. So his arrival might herald more acquisitions. With defense markets depressed, it’s a cheap time to buy.

Sir Roger doesn’t have an unblemished history. He resigned as chairman of Mitchells and Butlers after the pub operator lost £0.5 billion in property deals. But as an investor in Centrica, Neil Woodford knows him first hand and that’s said to be the reason behind his support.

The article Another Good Reason to Hold BAE Systems originally appeared on Fool.com and is written by Tony Reading.

Motley Fool contributor Tony Reading owns shares in BAE and Centrica but no other shares mentioned in this article. The Motley Fool has no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!