A much-hyped showdown between the board of Alliance Trust and rebel shareholder Elliott Advisors has been avoided after a last-minute deal was brokered yesterday.
The potentially bruising encounter was due to take place at the Trust’s annual general meeting in Dundee today but was put off after the company agreed to co-opt two of Elliott’s three independent non-executive director nominations – in Anthony Brooke and Rory Macnamara – on to the board.
The Trust had previously fought against Elliott’s proposal, arguing that the three NED nominations put forward by Elliott could not be judged as truly independent.
But that position was set aside early yesterday when the Trust revealed that a compromise had been reached with its single biggest shareholder.
In return for the board nominations, Elliott agreed to withdraw its three resolutions from the AGM and put an end to its campaign of agitation against the Trust for the next year.
The agreement also committs the hedge fund to support the board and management in all other resolutions.
Both parties have also signed up to a mutual “non-disparagement” agreement and Elliott, which has a 12% holding in the Trust, has agreed not to call a general meeting of the company until after next year’s AGM at the earliest.
Mr Brooke, a former SG Warburg executive, and Mr Macnamara, whose corporate career included a spell at Morgan Grenfell, will initially act as board observers until customary regulatory approvals are obtained.
The Alliance Trust also confirmed it would continue with its own search for an additional non-executive director – a process that will be done in consultation with the companies main shareholders.
Trust chairman Karin Forseke, who as recently as the weekend was urging the firm’s 60,000 strong small shareholder base to vote down Elliott’s requisition, yesterday welcomed the two new board members.
“On behalf of the whole board, I would like to express my gratitude to our shareholders for engaging with us on this important issue,” Ms Forseke said.
“Having considered this feedback we have worked with Elliott to find a compromise which we believe is in the best interests of all our shareholders.
“I would also like to welcome Anthony and Rory to the board where their significant experience will be a considerable asset.”
In response, Elliott – which has denied an assertion by the company that it requested a 40% liquidation of the Trust – said it was pleased to have reached an “understanding” and looked forward to “following the enlarged board’s progress on strategic and business matters” over the coming year and beyond.
“Elliott acknowledges and appreciates the widespread engagement and support from fellow shareholders of the company and others in recent weeks,” the group said in a statement.
“ We believe that this solution is in the best interests of all shareholders.
“Elliott would also like to express its gratitude to Peter Chambers for engaging with this effort and for gracefully agreeing to stand aside as a candidate to join the board.
“We understand that Alliance Trust will wish to set the criteria for its own search for a further non-executive director, and will accept the company’s open invitation to major shareholders to be consulted in that process.”
Shares in Alliance Trust dipped marginally in trading yesterday as investors reacted to the deal.
Analyst Christoper Brown of JP Morgan Cazenove said the last-minute truce had caught the market by surprise.
“In our view this looks like more of a victory for Elliott than it does the board, which had been strongly against the appointment of these nominees,” Mr Brown noted.
“But to paraphrase Keynes, when the facts change you change your mind.
“And we can only infer that having consulted widely with shareholders, the chairman discovered that shareholders are not entirely happy with the status quo.
“As a result we think it highly likely that the board will make some important changes over the coming months.”