A week after Alliance Trust announced it had received an informal approach from RIT Capital Partners about a possible £5bn merger, the deal is off.
RIT, chaired by British financier Jacob Rothschild, said it would not be in the best interests of its shareholders to make an offer for its fellow investment firm after all.
Alliance, which has been under pressure from activist investor Elliott to make changes, has begun a strategic review and said this was making good progress. It said it would suspend any share buybacks under the review was completed.
Alliance’s shares have lost 5.5p to 511p on the news, while RIT is down 13p at £15.91. Stephen Peters, investment manager at Charles Stanley said that despite the ending of merger talks, Alliance could not stay as it was:
The announcement that RIT Capital and Alliance Trust are no longer in talks must be one of the shortest trust romances in recent memory. After a few messages and a date that got publicised and well discussed in the press, they’ve decided to just be friends. Investors in RIT Capital are left untroubled, whilst Alliance Trust needs a solution to allow Elliott Advisors to sell their 16% stake.
Whilst we do not wish to pre-judge the outcome of [Alliance’s strategic] review, and accept the final outcome may be less radical than we would wish, we are at least comforted that there is a better and more open dialogue between the board and other interested parties, including shareholders, today than in the recent past.
We are sure there are, and will be, other interested parties in Alliance Trust. The savings business is possibly its most attractive element and should have no shortage of suitors. Other investors may welcome the change to run a significant amount of assets in a closed ended form - large US based fund management houses may see it as attractive. The well-known investment trust managers in the UK would undoubtedly express an interest, although we would need some convincing that a simple merger with the likes of a Scottish Mortgage or Murray International, for instance is really in the best interests of shareholders and the sector in general. Whatever happens, the status quo is not an option.
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