Alliance Trust board blew £3m in doomed shareholder battle, AGM hears

Alliance_Trust_NewShareholders who gathered at Dundee’s Gardyne Theatre for Alliance Trust’s much anticipated AGM yesterday let out a collective gasp as it was revealed that the board’s protracted - but ultimately doomed - battle with an activist investor had cost the firm £3 million.

The company spent a similar amount resisting Laxey Partners when the activist shareholder unsuccessfully challenged the board over the trust’s performance in 2011 and 2012.

Until the news of a similar outlay broke, some of the sting had been taken out of what had, until Tuesday, been billed as the final showdown between the current regime led by chief executive Katherine Garratt-Cox and Chair Karin Forseke, and US hedge fund Elliott Advisors.

But disclosure of the £3 million spend, which one shareholder pointed out represented 15 per cent of Alliance’s annual expenses, recharged tensions as bosses were forced to explain the last minute deal that they accepted would be “viewed as a u-turn”.

Despite the huge sum expended in trying to hold off attempts by Elliott to have three new directors parachuted onto the board, a capitulation announced at the eleventh hour on Tuesday saw two of the three nominees – Anthony Brooke and Rory Macnamara –given seats on the board in exchange for a one year ceasefire.

Elliott Advisors, which holds a 12 per cent, stake has agreed not to agitate against the trust until after the 2016 AGM. The hedge fund had a presence at yesterday’s meeting but declined to comment.

The 12-month non-aggression pact effectively gives Ms Garrett-Cox and her team a year in which to improve shareholder returns and reduce the stock’s 12 per cent discount to net asset value.

At the meeting, newly installed non-executive director Anthony Brooke did little to calm concerned shareholders as he admitted that despite the concerted and costly efforts to have him appointed to the board of the 127-year old wealth manager, he actually knew little about the business.

In the wake of the deal, Ms Forseke opened yesterday’s AGM by explaining that the trust had come to its decision after an extensive consultation with shareholders in the run-up to what she described as being a “finely balanced” vote.

“We know this is viewed as a U-turn,” she said. “However, with the current uncertainty removed the board and management can continue to focus on improving performance.”

Katherine Garret-Cox
Katherine Garret-Cox

Elliott’s requisition and the trust’s concession was returned to time and again by concerned shareholders.

While it was conceded that the need for the trust’s investment performance to improve was clear, Ms Garratt-Cox was forced to field questions that suggested the deal was the equivalent of kicking the can down the road and mean the Trust simply finding itself in the same situation in 12 months’ time.

Long term shareholder John Halley, said: “I fear the actions of Laxey and Elliott will become a constant and costly distraction.”

“It is hard to guarantee anything in financial services but the reason this was important was restore stability to the business”, chief executive Katherine Garrett-Cox said.

“The investment team have been extraordinary throughout this process.

“I have never been so proud of a group of people. They have kept their heads down and continued to deliver,” added Ms GarrettCox.

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