Alliance Trust (ATST) shareholders have passed proposals to outsource its management to eight external managers and buy back the entire stake of its largest shareholder, activist investor Elliott, which is worth about £620m or 20 per cent of its issued share capital.
Shareholders voted overwhelmingly in favour of outsourcing the management with 96 per cent of the votes in favour. But a lower number - 77.3 per cent - voted in favour of repurchasing Elliott's shares because some shareholders felt that Elliott was being given favourable treatment over other shareholders.
Elliott has been a shareholder since 2010 over which time it has effected many changes. These have included getting the trust to start making share buybacks to control the discount to net asset value (NAV) - something it had virtually never done before; an overhaul of its board and the ousting of its chief executive, Katherine Garrett-Cox; a greater focus on equities and a drive to reduce costs.
Alliance Trust's board says it will now finalise arrangements for its transition to a multi-manager structure, and expects that the trust's overall manager, investment consultancy Willis Towers Watson, and the eight underlying equity managers it has chosen to run the trust's equity portfolio, will be formally appointed in April.
Elliott's shares will be bought back in five tranches at a 4.75 per cent discount to NAV on the business day before the relevant trade date.
Shareholders also approved proposals to increase Alliance Trust's ability to buy back shares by 5 per cent or about 23m shares: the trust previously had the authority to repurchase up to 77m shares or 14.99 per cent of issued share capital. Alliance Trust's board "remains committed to its proactive approach to buying back ordinary shares, and going forward is prepared to do so at or around the same discount level as that of the share repurchase from Elliott so long as it is in shareholders' best interests."
Sharesoc, the UK individual shareholders society, commented: "This is surely a major win for private investors and the stance taken by ShareSoc and the Alliance Trust Shareholder Action Group. Alliance Trust can now move forward."
And analysts at broker Numis said: "A low cost multi-manager global equity vehicle holds considerable appeal, and it made sense for the board to provide an exit for Elliott rather than to face the threat of hostile corporate action in future. The exit discount is tight relative to the trust's historic trading range, but the shares are trading at a discount of about 4.4 per cent meaning that other investors have the ability to sell at the same level.
"Alliance Trust's board has already demonstrated a commitment to buybacks through the repurchase of around 39m shares (£250m value) since the results of its strategic review were announced in December 2016. However, it is crucial that the board meets its commitment to protect a discount of around 5 per cent in future."
