Ball in Elliott’s court as Alliance Trust board makes buy-back offer

The Trust’s bosses have made the offer publicly through a statement to the Stock Exchange.

While the Trust has bought back 30.5 million of its own shares since December using the authority allowed following its management overhaul, it has been unable to access the 19 per cent stake currently owned by Elliott due to listings rules which categorise any shareholder with more than a 10 per cent of a firm’s capitalisation as a related party.

The Alliance Trust’s board, which is led by chairman Lord Smith of Kelvin, noted in its announcement: “Related parties are unable to participate in share buybacks in the same manner as other shareholders without prior approval from independent shareholders at a general meeting of the company”.

Thus requiring the approval of its shareholders, the board laid down its offer to Elliott as it stated it would “if requested, propose the requisite resolution to provide a related party with the ability to participate in the company’s share buybacks at or around the discount level that has been available to other shareholders”.

Although Elliott has so far declined to comment on the proposal, according to reports, should the investor decide to take part in the buybacks, the Alliance Trust’s board would immediately ask other shareholders to green light the plan.

The activist investor has led a long-running campaign to improve the 129 year-old Alliance Trust’s performance and played a significant role in the dramatic changes that have taken place over the past 12 months.

The move to reduce Elliot’s stake comes as the Trust’s board seeks to follow the radical shake-up of its management structure with transition of its day-to-day running to eight separate fund houses and the selling of its Alliance Trust Investments platform to Liontrust Asset Management.

Elliott’s more than 19 per cent stake in Alliance Trust, which had £3.3 billion of net assets at the end of December, consists of 10.9 per cent of its ordinary shares and via derivative contracts whose value derives from share price movements.

Any proposals are likely to be put to shareholders at a series of special shareholder forums which kick off in London today followed by a second in Dundee on Friday with a final one in Edinburgh on Monday.

During the period of the trust’s buyback programme, the firm’s share price has increased from 579.5p to 638p.

The discount at which Alliance Trust’s shares trade has improved significantly over the course of the drive, reducing from 10.3 per cent at the end of November to 4.5 per cent at the end of December.