20th Mar 2015 15:30
LONDON (Alliance News) - The spat between Alliance Trust PLC and Elliott Advisors (UK) Ltd escalated on Friday, with the disagreement continuing in a very public way.
Alliance Trust got the exchange underway on Friday, claiming that the activist investor's "short-term agenda" is a potential threat to its very existence. But Elliott took just a few hours to respond, claiming that Alliance Trust's board is "out of touch" with shareholders' concerns.
Karin Forseke, who chairs Alliance Trust, said that Elliott's move to make changes to its board is "completely unacceptable" and advised other shareholders to vote against the proposals.
Elliott, which has built up a 12% stake in Alliance Trust, wants the company to appoint former SG Warburg executive Anthony Brooke, ex-CEO of Legal & General Investment Management Peter Chambers, and Rory Macnamara, previously of Morgan Grenfell, to the board of Alliance Trust.
The activist shareholder has criticised Alliance Trust's performance and highlighted losses in its investments and savings subsidiaries. It has also raised concerns about the "high and inflexible nature of the cost of the trust's internal investment management function".
"The board believes that they (the proposals) are a pre-cursor for further disruptive actions from Elliott which are likely to focus solely on engineering an exit from their shareholding and would not be in the interests of all of our shareholders," Forseke said in a statement.
"We do not consider their proposed directors to be independent and believe that Alliance Trust's current board is diverse, dynamic and more than fit for purpose. We pride ourselves on our transparency and honesty with all our shareholders, and as a board we will not lie down and allow one shareholder to dictate the future of Alliance Trust," Forseke said.
"Our focus is on delivering returns to all our shareholders through a combination of strong investment performance and the development of our subsidiary businesses, which we believe will lead to a sustainable narrowing of the discount," Forseke added.
However, Elliott said it was "puzzled" by Alliance Trust's response to its demands, alleging that the company has not responded to an invitation to meet its three proposed board candidates.
"Elliott notes with regret that the company has resorted to questioning the independence of three individuals with impeccable credentials and integrity, when the candidates have been identified by a leading external search firm and are wholly independent of Elliott, who had never met any of the candidates previously, and of Alliance Trust," Elliott said.
The activist also claimed that Alliance Trust made "factually incorrect assertions" about what it is proposing.
"We urge all shareholders who agree with Elliott's view that Alliance Trust requires fresh impetus at the board level to make their views known to the company," Elliott said.
Alliance Trust hit back once again later Friday, saying Elliott's criticisms of the company and its comments on "factually incorrect assertions" are misleading. Alliance Trust's board said it has minutes of meetings with Elliott, and claims Elliott repeatedly suggested that Alliance Trust undertake a tender offer for 40% of its shares at a discount of 5% or less.
"In one of these meetings Elliott also showed a presentation they had prepared to the company which detailed their proposal for a tender offer," Alliance Trust said. Alliance Trust also drew attention to an excerpt from a letter it was sent by Jonas Rydell of Elliott.
The excerpt read as follows:
"Based on our extensive experience in such matters, we offered your management the benefit of a high level review of the options available to it, should the company wish to adopt it or should the resolution be passed. We presented a total of eight options and variations of discount control, and commented in each case on their effectiveness and benefits to different groups of shareholders. We showed, for illustrative purposes, the several hundreds of millions of pounds worth of value creation available to all shareholders (tendering and non- tendering) from a partial tender offer in cash at various discounts to net asset value, various levels of acceptance, and various levels of post-tender discount."
Alliance Trust said it continues to refute Elliott's "ill-founded criticisms" and will address them more full in a circular to shareholders shortly.
Alliance Trust shares were up 0.4% at 525.50 pence Friday afternoon.
By Samuel Agini; [email protected]; @samuelagini
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