First minister Sturgeon intervenes to have say on Alliance Trust board battle

First Minister Nicola Sturgeon has taken the unusual step of writing to Alliance Trust chief executive Katherine Garratt-Cox to offer her backing for the current board’s position in resisting an assault by a US hedge fund to impose three new directors at the Dundee-based wealth manager.

The intervention will be seen as a welcome boost Ms Garratt-Cox ahead of next Wednesday’s crunch AGM when activist shareholder Elliott Advisors will attempt to fulfill its ambitions that have been condemned by the current regime as born of short-term profiteering.

According to reports, the unusual political step into the affairs of a private company’s boardroom was at the invitation of the boss of the 127 year-old trust.

Ms Sturgeon’s carefully worded reply highlights the issues of short-term market gain versus long-term sustainability that have formed basis for the increasingly fraught stand-off with the 12 per cent shareholder of the £3.6 billion trust.

The SNP leader is also believed to have invited the chief executive to remain in contact in a correspondence that would seem to suggest a warm relationship despite Alliance Trust’s warnings over independence in the run up to last year’s referendum.

SNP’s deputy leader and MP for Dundee East, Stewart Hosie supported the current board’s position yesterday as he described Elliott’s agitating as not in the interests of all shareholders and called for Alliance to be “protected over the long term”.

He said: “This is a critical time for the future of Alliance Trust and I note the helpful and supportive comments from business leaders such as Sir Angus Grossart in recent days.”

Describing Alliance Trust was one of Dundee’s and Scotland’s greatest successes Mr Hosie said: “Alliance Trust employs around 250 skilled people in Scotland and serves customers across the UK from its Dundee base. The emotional heritage that is invested in the city and Scotland more broadly must be protected. While I recognise the importance of active and healthy investor challenge, I do not believe that Elliott Advisers’ goals are aligned to the long-term interests of the city of Dundee or Scotland more broadly. Therefore I encourage Alliance Trust shareholders to consider their votes very seriously ahead of next week’s AGM.”

He added that it was “very important to me that the city’s bright future, of which Alliance Trust has a key role to play, is protected over the long term”.

Meanwhile, Alliance Trust’s chairman, Karin Forseke, has refuted Elliott’s denials that it had specifically proposed a liquidation of 40 per cent of the 127-year-old trust.

Speaking to the Herald newspaper, she said: “They want us to tender at a three to five per cent discount, they have repeatedly told us to do 40 per cent at that discount.”

The trust’s share price is currently at a discount of more than 12 per cent to the total asset value of the fund.

Elliott has denied making such proposals, insisting it is a long-term shareholder, and has published email correspondence purporting to show as much. Ms Forseke said: “It has been done verbally, several times.”

Ms Forseke also contested Elliott’s claim last week that it had been made an offer by Alliance Trust to buy up its entire stake 17 months ago.

“That is our brokers,” she said. Any such offer would have been made by brokers, not by the trust, which knew nothing about the terms offered, she insisted. “Whatever we do, we have to treat shareholders equally.

We could never be in a position to give preferential treatment to one shareholder.”

Speaking on the partial liquidation, Ms Forseke said: “That is what our shareholders do not want us to do. Most are really long-term shareholders, dependent on the dividend and continuous growth in the share price value. It would of course benefit the shareholders who could get out but what about the rest…it would be a very different company.”

On the three directors proposed by Elliott for election at next week’s annual meeting in Dundee, Ms Forseke said poor corporate governance had been one of the main factors in the financial crash.

“This is not an issue about the individuals, it is about the process….a couple of factors are fundamental and one is the diversity of the board in skills and backgrounds, as well as the process of due diligence.”

Alliance currently searching for a non-executive to add to its seven-strong board and has hired a headhunting firm to speed up the process.