Following a high-profile battle, activist investor Elliott Advisors has withdrawn its resolutions to add three members to Alliance Trust's board after the latter's acceptance of two of its suggested candidates. Shareholders were due to vote on the controversial proposal at Wednesday's annual general meeting (AGM). The investor has also committed to support the trust in all other resolutions. In return, Alliance Trust will appoint two of Elliott's suggested candidates - Anthony Brooke and Rory Macnamara - who have extensive experience in financial services, and will continue to seek a third new board member.
The agreement follows private discussions between the two parties who have now made non-disparagement undertakings. Elliott will now not call a general meeting or seek to agitate against the trust publicly until after the 2016 AGM.
Elliott has raised grievances against the trust, including underperformance against sector peers and relevant benchmarks, and continuing losses in two operating subsidiaries, Alliance Trust Savings and Alliance Trust Investments.
Elliott is also concerned about Alliance Trust's relatively large discount to net asset value (NAV) and had said when it sought to engage with management on matters of corporate governance and business concern that it was "not given any meaningful response" - something Alliance Trust denies.
Alliance Trust rejected Elliott's proposals and refuted its claims, arguing among other things that the proposed new directors were not independent of Elliott because it paid a search firm to find them.
But analysts question why Alliance Trust has accepted two of the directors it had vigorously argued against. "Shareholders have to contend with the uncomfortable fact that 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.
Analysts at Numis argued that the agreement's timing suggested the board realised it was about to lose the vote, and was trying to save face. Alliance Trust said it was too early to know what the outcome of the vote would have been, but admitted there were lots of different opinions, and argued it was in the interests of shareholders to put aside the events of the past few weeks and concentrate on improving performance and returns.
It also said that by reaching a "compromise" any suggestion of selling its subsidiaries and outsourcing the management of the trust to a third party (another Elliott suggestion) were off the table until after the 2016 AGM.
Elliott, however, has indicated that it will continue privately to be a very active shareholder and has not agreed that the status quo is acceptable.
