Alliance Trust to battle with shareholders

INVESTMENT manager Alliance Trust, the FTSE 100 firm run by chief executive Katherine Garrett-Cox, is embroiled in a pitched battle with its shareholders after Laxey Partners, which owns 1.3 per cent of the firm’s stock, set up a shareholder action group over the weekend.

Laxey co-founder Colin Kingsnorth says that the group has been contacted by dozens of interested stock-holders representing 10-20 per cent of the firm’s shares regarding disputes over investor voting rights and the discounted value of Alliance’s stock.

“People have written to them and sat down with them many times and they’ve done nothing,” said Kingsnorth. “They’ve pushed them aside.”

He says that the firm’s stock currently trades at an 18 per cent discount to net asset value and is demanding that it adopt a discount control mechanism – whereby it would automatically buy back shares if the discount reached a certain level – to protect investors.

Alliance Trust has implemented two strategic buybacks since October 2009 to a total value of £35.2m, but neither has been enough to satisfy its disgruntled stockholders.

Kingsnorth blames the discount on the firm’s voting system, whereby members of the Alliance Trust Savings Scheme – which includes senior management and any Alliance Trust clients – vote as a bloc instead of on the basis of one vote per share. The scheme is Alliance’s biggest stockholder, owning 21 per cent of its shares.

Laxey wrote to the board of Alliance outlining its grievances on 10 November, but it was not satisfied by the response it received.

This is not the first time the voting rights issue has been raised by shareholders.

In 2008, Troy Asset Management organised a collection of shareholders representing 10 per cent of Aliance stock to raise the issue non-publicly, but they were defeated by senior management.

In order to call a vote on the discount or the company’s voting system at its annual general meeting in May, shareholders either representing five per cent of its stock or over 100 in number must support placing them on the agenda.

But Kingsnorth says he has already met this requirement by dividing Laxey’s holdings into 100 separately registered companies.

Alliance Trust refused to comment yesterday.