Battle lines were drawn yesterday as activist investor Elliott Advisors (UK) went gunning for boardroom change at Dundee’s Alliance Trust.
The fund has built up a 12% stake in the Trust and is unhappy at its investment performance, cost base and continuing losses within its Investments and Savings subsidiaries.
Elliott has now written to fellow shareholders urging them to back a resolution it is requisitioning at the Trust’s AGM next month.
It calls for the appointment of three new independent non-executive directors – Anthony Brooke, former Legal and General executive, Peter Chambers and Rory Macnamara, formerly of Morgan Grenfell – in a bid to drive performance.
In 2012 Laxey Partners raised a resolution calling for the Trust’s investment management function to be outsourced and the discount to be narrowed through share buy-backs. It was ultimately defeated convincingly.
Elliott yesterday outlined concerns over the Trust’s corporate governance under CEO Katherine Garrett-Cox and chairman Karin Forseke.
“Since we became shareholders in Alliance Trust in 2010, there has been a change of chairman and all but one of the other non-executive directors,” Elliott said.
“By contrast, the chief executive has been in her post longer than any of the non-executive directors. All appointments have been made by the board itself, without shareholder consultation and without prior notice of a vacancy.
“Late last year the company made a significant management change by replacing its head of equities, who was responsible for managing over 95% of the company’s assets, after many years of poor investment performance.
“The post was filled without prior notice, through internal promotion without advertisement, without inviting external proposals, and without canvassing shareholder views.”
Elliott also said Alliance’s board had failed to investigate whether external asset managers could offer the potential for better returns at a lower cost.
“We believe that the board has failed to act in the spirit of this important governance principle by not inviting world-class asset managers to present alternative solutions to the board, or directly to shareholders, to be considered as an alternative to continued internal investment management. This failure is symptomatic of broader corporate governance deficiencies and an unwillingness of the board to challenge the status quo.”
The Courier understands Ms Forseke and Ms Garrett-Cox separately met with Elliott representatives last week but there was no discussions over the appointment of new NEDs at either meeting.
The Trust recently reported a net asset value total return for the full-year to December 31 of 8.1% and declared a total dividend of 12.38p for the year, continuing a record of consecutive annual dividend growth for a 48th year.
“The board will consider the requisition put forward, as it would any proposal made by a shareholder, and will respond in due course,” a spokesperson said.
“Alliance Trust has strong corporate governance controls in place and has an effective and committed board of directors.
“We remain entirely focused on running the business, delivering investment performance and acting in the best interests of all of our shareholders with a focus on the long-term.”