Alliance Trust to buy back activist investor’s shares in £620m deal

Trust chairman Lord Smith of Kelvin announced the agreement following talks on Thursday night ahead of an extraordinary general meeting the next day.

The repurchase will now go before shareholders for approval.

If given the green light, Alliance Trust will reacquire a total of 95,478,576 ordinary shares directly and indirectly controlled by the Elliott grouping comprising Elliot International LP, The Liverpool Limited Partnership and Elliott Associates.

The plan is to acquire the shares in five equal tranches, each at a 4.75 per cent discount to the prevailing net asset value (NAV) at the time. At current NAV levels, the deal is worth in the region of £620 million.

Activist investor Elliott 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 - including the removal of former CEO Katherine GarrettCox and her chairman Karin Forseke.

The move to reduce Elliot’s stake also 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.

Speaking while in Dundee on Friday for an investor forum Lord Smith said he was pleased to agree a deal with Elliott and remove the “overhang” of their continued presence on the share roster.

He added: “We can get on with the business of running the company and, more importantly and what we are here to talk about today, how we are going to manage our money in future.”

In a statement to the stock exchange, the trust said the agreement with Elliott was in the “best interests of the company and its shareholders” and would accrue a benefit to continuing investors through the uplift in net asset value of approximately 1 per cent.

Lord Smith said shareholders would be asked to approve the buyback at the extraordinary general meeting being held in Edinburgh on February 28, when they will also vote on the management changes.

If the buyback is approved, Elliott, which holds around 10 per cent of the trust’s ordinary shares and the rights to a further 10 per cent via contracts for difference, would excluded from the vote on management changes.

Lord Smith told shareholders attending the meeting the buyback would “remove any questions about Elliott’s longstanding intentions as a shareholder”.