‘Major problems’ if Alliance Trust loses vote

Alliance Trust chairman Robert Smith

ShareSoc, the UK Individual Shareholders Society, warned of “major problems” for Dundee-based investment firm Alliance Trust if shareholders do not support the firm’s board in its radical plans to outsource its equity portfolio management and buy back the 19.75% stake of its biggest shareholder, US activist hedge fund Elliott Advisors.

Alliance Trust has convened a general meeting for February 28 where four resolutions will cover the change in investment approach and the proposed buy back of Elliott’s shares.

“Our recommendation is that shareholders vote ‘for’ all the resolutions,” said ShareSoc.

“ShareSoc is issuing this press release because we understand that some institutional investor advisory services have expressed some concerns about the proposals.”

ShareSoc added: “If the resolutions at the general meeting were defeated then it would put the company back at square one and potentially create major problems.

“Investors need to consider the proposals bearing in mind the history of the company and the other options available.

“In other words, a holistic consideration of the proposals needs to be taken rather than taking issue with minor technical points.”

Alliance Trust said last month the repurchase of Elliott’s 95.5 million shares, if approved by shareholders, would be undertaken 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.

Elliott has long been putting pressure on Alliance Trust to restructure.

ShareSoc said The Alliance Trust Shareholder Action Group, which has been supported by ShareSoc, was satisfied that the new board had made good progress in revitalising the trust since it was appointed.

“The steps taken have substantially closed the share price discount to net asset value (a long standing concern of many investors), the disposal of the non-core Alliance Trust Investments (ATI) subsidiary has been agreed and steps taken to make Alliance Trust Savings (ATS) both profitable and able to stand on its own feet,” said ShareSoc.

“The board structure and corporate governance of the company have been changed and are now in a more conventional form for investment trusts.

“The repurchase of the Elliot shares will avoid future pressure from them and the purchase appears to be at a fair price and does not favour them over other investors who can currently sell shares in the market at a similar price and will continue to be able to do so. 

“For those reasons we support the recommendation of the directors to vote in favour of the resolutions. 

“We encourage all shareholders to ensure that they vote on these important resolutions.”