US hedge fund Elliott Advisors has launched a fresh attack on the board of Alliance Trust as the war of words between the two parties escalates.
The activist investor, which owns a stake in the trust “in excess of 12 per cent”, is pushing for a shake-up of governance and wants to appoint three non-executive directors to the 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.
The 127-year-old investment trust has urged investors to vote against the move in the AGM on 29 April and on 26 March published a circular claiming Elliott “has plans for disruptive actions” and that its interests “are at odds with the company’s other shareholders”. It also suggested the three directors put forward by Elliott are not independent.
In a response published today, Elliott claims Alliance Trust has underperformed its sector peers and relevant benchmarks “over all relevant return periods”. It says £1,000 invested when current chief executive Katherine Garrett-Cox was appointed to the board in 2008 would have grown to £1,671, compared to £1,848 if invested in the global stock market.
Elliott also says the “ongoing charges ratio” published by the company is “distorted” because some costs are excluded. The investor argues the true cost to shareholders was in fact 0.9 per cent in 2014 and 1 per cent, on average, over the past five years.
In addition, Elliott urges Alliance Trust to “improve the sustainability of its dividend policy and dividend growth ambitions”.
Finally, the investor raises concerns about the level of remuneration dished out to the chief executive and chairman during periods of underperformance.
“As a long-term and engaged major shareholder in Alliance Trust, Elliott has repeatedly sought to express legitimate concerns and initiate discussions with the company in private,” Elliott says.
“When the board failed to address matters of substance, we availed ourselves, as a last resort, of the minority protection provisions enshrined in legislation to make a requisition directly to shareholders.
“The debate with fellow shareholders in recent weeks has proven that our criticisms are widely shared. The company’s heavy-handed response to our proposals has served to validate our concerns of complacency, entrenchment and a lack of true independence on the board.”