Dundee-based investment trust company Alliance Trust plc said it agreed to buy out the 19.75% stake in Alliance held by its biggest shareholder, US activist hedge fund Elliott Advisors.
Elliott had long been putting pressure on Alliance to restructure and last month, the Dundee firm announced a radical strategic plan that included the outsourcing of equity portfolio management and the sale of investment division Alliance Trust Investments to Liontrust Asset Management.
Alliance said the repurchase of Elliott’s 95.5 million shares, if approved by shareholders, would be undertaken shortly after the company’s forthcoming general meeting in five equal tranches, each at a 4.75% discount “to the then prevailing NAV (net asset value).”
According to Reuters data, Elliott’s stake is worth roughly £630 million, based on Alliance Trust’s current market value of about £3.2 billion.
“Elliott has done quite nicely out of its stake in Alliance, and has instigated wholesale change at the investment trust, though it still remains to be seen whether that is to the long term benefit of shareholders,” Laith Khalaf, senior analyst at investment advisor Hargreaves Lansdown told Reuters.
“The withdrawal of Elliott from the shareholder register should lead to more stability for the trust, which now needs to focus on making sure the new investment strategy delivers.”
Analysts at Numis said in a note to clients: “Hedge funds tend to have a reputation as disruptive short term investors.
“In this case, however … we believe its activism has resulted in a far more attractive vehicle for all shareholders …
“It is encouraging that the agreement with Elliott is broadly in-line with the discount level of previous repurchases, and also that the board has committed to further buybacks at the same level.”
In a statement, Alliance Trust said: “The board believes that the proposed repurchase is in the best interests of the company and its shareholders as a whole …
“Furthermore, the board reaffirms its proactive approach to buy back shares, and going forward is prepared to do so at or around that same level.
“For these reasons, the board intends to recommend unanimously that shareholders vote in favour of the requisite resolutions to be put before the company’s shareholders to implement these proposals.
“The requisite resolutions, which require approval in advance of any repurchase by the company of Elliott’s shares, will be included as part of the business of the general meeting which is already due to be held on 28 February 2017.
“A further announcement providing additional detail in relation to the proposed share repurchase will be made at the time of publication of the shareholder circular convening the general meeting, which is expected shortly.”