Some peace at last? Alliance Trust to buy back activist investor Elliott's shares

 
William Turvill
Follow William
Live 8 Edinburgh - Stage
Alliance once said the action of Elliott "threatens the very existence of the company" (Source: Getty)

Relief at last for Alliance Trust’s management team: the company announced this morning it has reached a deal to buy its shares back from activist shareholder Elliott.

The US hedge fund became a shareholder in the investment trust in 2011, and has, to put it mildly, shaken things up a little.

The drama peaked in 2015 when, shortly before chief executive Katherine Garrett-Cox was forced out, Alliance accused Elliott of acting in a way that “threatens the very existence of the company, and rides roughshod over our long-term shareholders, our customers and our over 250 employees”.

Read more: French Connection boss signals two non-executive directors will step down

In a statement this morning, Alliance revealed it will buy back the 19.75 per cent of shares owned by Elliott in five equal tranches. Alliance will be seeking approval for the buy-back at its general meeting on 28 February.

Alliance said the move would enable the company to “move forward with its multi-manager proposal against the backdrop of a share register that is settled and supportive for the longer term”.

A spokesperson for Elliott said:

When Elliott became a shareholder over five years ago Alliance Trust had poor corporate governance and its shares traded at more than a 15 per cent discount to net asset value.

Since then, corporate governance has improved, an external asset manager has been proposed and the discount has narrowed to less than five per cent.

Elliott welcomes the opportunity to participate in the offer being made to all other shareholders under the buyback programme.

Read more: Under Press-ure: Activist takes 19 per cent stake in Johnston Press group

What the analysts said

Analysts seemed to think the agreement suited both parties.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said:

Elliott has totally transformed Alliance Trust and turned a tidy profit into the bargain, though it remains to be seen whether the changes deliver long term value for shareholders. However the discount has narrowed significantly, and on paper the new investment strategy looks like an improvement.

The withdrawal of Elliott is also positive for remaining shareholders because it will boost the NAV of the trust, and will hopefully lead to some much needed stability in terms of strategy.

“We believe that this is a good outcome for all sides,” said analysts at Numis this morning.

“We have been positive on the changes announced by the board, and believe that a low-cost multi-manager investment company holds considerable appeal if it can deliver consistent outperformance of the MSCI AC World benchmark.

“However, we felt that the results of the strategic review, announced in mid-December, were flawed as they failed to address the problem of how to find an exit for Elliott.

“In our view, Elliott would have been a ‘thorn in the side’ for the company and might even have added further to its stake.”

Related articles