Just a week after publicly admitting they were in merger talks, RIT Capital Partners (RCP) has decided not to make a takeover offer for Alliance Trust (ATST).
RIT Capital did not give a specific reason but stated: "Following careful analysis and constructive discussions with representatives of Alliance Trust, RIT has concluded that it would not be in the best interests of its shareholders to make an offer for Alliance Trust and accordingly announces that it does not intend to make an offer to acquire Alliance Trust."
RIT Capital did not say why it had made the offer in the first place.
Alliance Trust's share price fell after the announcement on 7 June from about 518p to 510p but then stabilised, and was at around 511p the day after. RIT Capital's share price initially rose on the news hitting a peak of about 1,618p before moderating and the day after was trading at about 1,600p.
Analysts had said there were a number of reasons why a merger could be difficult including the two trusts being different to each other, as well as possible resistance to Alliance Trust disappearing, and how RIT Capital would deal with Alliance Trust's subsidiaries, Alliance Trust Savings and Alliance Trust Investments.
Alliance Trust is in the middle of a strategic review on its future after a shake-up of its board and management over the past year, which included the demotion of chief executive Katherine Garrett-Cox last October.
It had suspended its share buyback programme because it was under offer, in accordance with takeover rules. But it now says that even though it is no longer in an offer period it will continue not to do share buybacks until it has finished this review which will consider "a broad range of potential courses of action" - even though it trades at a discount to net asset value (NAV) of 9.8 per cent.
But this is tighter than the double-digit levels it had traded at for many years and analysts at Numis added: "Although the share buyback programme has been suspended, we expect the share price to be supported in the near term by the potential for corporate action. However, the 16 per cent stake worth about £423m held by Elliott Advisors [Alliance Trust's largest shareholder] is still overhanging, and if the strategic review simply leads to a continuation of the current strategy, we believe that the discount would be likely to widen once again. As a result, we believe that Alliance Trust needs to consider a change in mandate/manager along with a partial cash exit via a tender offer."
| Trust | Discount/premium to NAV (%) | 1-year share price return (%) | 3-year cumulative share price return (%) | 5-year cumulative share price return (%) | 1-year NAV return (%) | 3-year cumulative NAV return (%) | 5-year cumulative NAV return (%) | Yield (%) | Ongoing charge (%) |
|---|---|---|---|---|---|---|---|---|---|
| Alliance Trust Ord | -8.9 | 5.4 | 24.5 | 54.4 | 0.5 | 18.7 | 42.1 | 2.4 | 0.78 |
| RIT Capital Partners Ord | +2.77 | 1.8 | 36.4 | 34.0 | -2.3 | 20.7 | 34.9 | 2 | 1.34 |
| AIC Global sector average | -5.1 | 18.2 | 38.0 | ||||||
| MSCI AC World Index NR GBP | -0.8 | 21.3 | 45.5 | -0.8 | 21.3 | 45.5 |
Source: Morningstar, as at 31 May 2016
