Alliance Trust ‘surprised’ by ShareSoc backing to activist’s challenge

The Dundee-based investment giant is at the heart of a tussle with leading shareholder Elliott, a US fund agitating for boardroom change that it says will help improve the value of the firm.

In the latest twist, ShareSoc, which speaks for 10 per cent of small stock market investors, has spoken out in favour of Elliott’s move, which centres around an attempt to appoint three independent non-executive directors to the Trust’s board.

The three candidates put forward are Anthony Brooke, a former executive of SG Warburg, Peter Chambers, former chief executive of Legal & General and Rory Macnamara, a former corporate financier at Morgan Grenfell.

In the latest volley in what is becoming an increasingly hostile war of words, Alliance said: “The board reiterates its concern that Elliott’s proposal of adding three non-executive directors to the … board is an attempt to pursue its own agenda and maintains its belief that these directors cannot be judged to be independent.”

Elliott blames poor corporate governance at the group for a relatively wide discount of around 12 per cent to its net asset value.

Alliance Trust’s peers trade at an average discount of 5.8 per cent.

ShareSoc, which represents individual investors who invest in the UK stock markets, has called on Alliance Trust’s shareholders to vote in favour of the proposed directors unless the company puts forward stronger arguments against the move.

Roger Lawson, ShareSoc deputy chairman (pictured), accused Alliance of a rapid and “intemperate” response to Elliott late last week, when the trust dismissed proposals for three new non-executives as “completely unacceptable”, igniting the dispute with its 12 per cent shareholder.

Mr Lawson said the key issues were the trust’s reported 14.6 per cent discount before Elliott’s move, which was “too high for such a non-specialist trust”, and the total share price return, which was below its sector average over one, three, five and 10 years.

“Although there was some improvement in the last year, this seems to have partly arisen from special circumstances related to their private equity and mineral rights investments. In essence the performance has been pedestrian for many years.”

ShareSoc says Elliott’s reported past suggestion of a tender offer is “perfectly understandable” but with self-managed trusts such as Alliance there can be “reluctance to downsize the company”.

The society says shareholders should vote in favour of the proposed directors, who appear to be independent, unless Alliance comes up with stronger arguments.

“Their rejection of the proposals out of hand seems unwise and unfortunately a typical response from boards who are reluctant to tackle the key issues when faced by criticism from outside.”

The current dispute represents Alliance Trust’s third shareholder action in four years.