Alliance Trust (ATST) will no longer face a challenge at its annual general meeting (AGM) tomorrow after one of its largest shareholders, Elliott Advisors, withdrew its resolutions to add three new members to the board. Elliott has also committed to support the board and management on all other resolutions. In return Alliance Trust has agreed to appoint two of its suggested candidates to the board - Anthony Brooke and Rory Macnamara - both of whom have extensive experience in financial services. Alliance Trust was already seeking another candidate following the resignation of board member Win Robins in February, and it will continue to do this.
The agreement follows private discussions between the two parties who have also agreed on certain mutual non-disparagement undertakings, and that Elliott will not call a general meeting or seek to agitate against the company, its board or management publicly until after the 2016 AGM at the earliest.
Elliott had a number of grievances with Alliance Trust and was particularly concerned about:
• persistent underperformance against its sector peers and relevant benchmarks;
• high and inflexible nature of the cost of the trust's internal investment management function; and
• continuing losses in two operating subsidiaries, Alliance Trust Savings and Alliance Trust Investments.
Elliott was also concerned about Alliance Trust's relatively wide discount to net asset value (NAV) and had said when it sought to engage with Alliance Trust on matters of corporate governance and business concern, it was "not given any meaningful response" - something Alliance Trust denies.
In recent weeks a war of words broke out between the two parties with various accusations and counter accusations. These include Alliance Trust's assertion that the proposed new directors were not independent of Elliott because it paid a search firm to find them – something Alliance Trust chairman Karin Forseke emphasised in an interview with Investors Chronicle - and that Elliott has a short-term agenda at odds with other shareholders.
However, analysts now question why Alliance Trust has accepted two of the directors it had vigorously argued against. "Shareholders have to contend with the uncomfortable fact Alliance Trust has told them the two people it now plans to appoint to its board are not independent," said Laith Khalaf, senior analyst at Hargreaves Lansdown.
Meanwhile analysts at Numis said: "The agreement to appoint two of the nominated directors represents a significant turnaround in Alliance Trust's stance. However, the timing of the agreement suggests that the board realised that it was about to lose the vote and needed to come up with some way to save face. The deadline for proxy votes was 11am yesterday (Monday 27) and we believe the board would have had a clear view on the outcome of the vote by yesterday evening."
Alliance Trust said it had received lots of feedback from retail and institutional shareholders over the last few weeks, and that it is in the interests of all of these to put aside the events of the last few weeks and to concentrate on delivering what it set out to do – improving performance and returns.
It said that by reaching a "compromise" any suggestion of selling its subsidiaries – Alliance Trust Savings and Alliance Trust Investments – and outsourcing the management of the trust to a third party, are off the table until after the 2016 AGM.
Elliott, however, has indicated that privately it will continue to be a very active shareholder, and that it has not agreed the status quo is acceptable. But it has also said that it will give the enlarged board time and space to tackle what it says are the persistent issues at the trust.
Alliance Trust, meanwhile, said it was too early to know what the outcome of the vote would have been, but it can't ignore the fact there are that lots of different opinions out there.
