Alliance Trust says hedge fund bid threatens its existence

Hedge Fund

Alliance Trust is fighting back against US activist hedge fund Elliott Advisors, declaring that its actions are a threat to the company’s survival.

Alliance, one of Britain’s oldest investment companies, said Elliott’s decision to nominate three independent directors of its choosing was motivated by its own short-term gains and not the long-term future of the company.

Elliott is the single largest shareholder in the Dundee-based firm with a 12% stake. It is hoping to secure support from its fellow shareholders - including at least 50,000 retail investors - to force change at the 127-year old institution.

Alliance said in a statement on Friday: “The board considers that this type of action potentially threatens the very existence of the company, and rides roughshod over our long-term shareholders, our customers and our over 250 employees.

“The Board considers that, having nominated directors to the company’s board, Elliott would pursue a short-term agenda aimed at facilitating an exit from its shareholding in the company. Given the size of its position, this would involve disruptive actions which are not in the long-term interests of our shareholders.”

Alliance revealed on Monday that its activist shareholder was attempting to impose the appointment of Anthony Brooke, formerly of investment bank SG Warburg; Peter Chambers, former chief executive of Legal & General Investment Management; and Rory Macnamara, formerly of investment bank Morgan Grenfell as independent directors on the board.

Alliance Trust advised shareholders to reject the proposals at its annual general meeting on 29 April, arguing the candidates could not be judged independent and could result in Elliott seeking “to exert undue influence”.

Shortly after Alliance’s statement on Friday, Elliott issued its own. It said: “We believe that [Alliance’s] decision is indicative of a board that is out of touch with the concerns of its shareholders, and which needs fresh perspectives.”

The US investor said the company had ignored a private invitation to hold discussions, accusing it of a “pattern of non-engagement” as it attempted to strengthen the board “for the benefit of all shareholders”.

Elliott dismissed Alliance’s claims about its intentions as speculative.

“We urge all shareholders who agree with Elliott’s view that Alliance Trust requires fresh impetus at the board level to make their views known to the company,” Elliott said.

Karin Forseke, Alliance Trust’s chair was defiant, branding Elliott’s proposals “completely unacceptable”.

She added: “We pride ourselves on our transparency and honesty with all our shareholders, and as a board we will not lie down and allow one shareholder to dictate the future of Alliance Trust.

“We do not consider their proposed directors to be independent and believe that Alliance Trust’s current board is diverse, dynamic and more than fit for purpose.

“The board is unanimous in strongly recommending that shareholders vote against all of the proposed resolutions.”

Shares in Alliance rose 0.2% to 525p.

Powered by article was written by Angela Monaghan, for on Friday 20th March 2015 10.15 Europe/ © Guardian News and Media Limited 2010


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