ALLIANCE Trust racked up a £3 million bill defending itself against an activist investor seeking to overhaul its board, the chair of the trust has admitted.
Karin Forseke made the revelation at the firm’s annual meeting in Dundee, where she was also asked whether she should resign in the wake of the battle.
Alliance, headed by chief executive Katherine Garrett-Cox, had been locked in a war of words with Elliott Advisors since the middle of last month over the US hedge fund’s attempt to have three new non-executives voted onto the trust’s board.
However, little more than 24 hours before yesterday’s annual meeting, Alliance said it would appoint two of Elliott’s nominees – Anthony Brooke and Rory Macnamara – once they have been approved by the City regulator.
Explaining why the Dundee-based trust had mounted such a rigorous defence against the activist, Forseke said: “The way in which the candidates had been proposed was contrary to our normal process of identifying prospective candidates, and we were concerned about their independence.”
Forseke, who admitted that the change of stance would be seen as a U-turn, added that Alliance had spent “a considerable amount of time” gathering other shareholders’ views, and found a “very mixed reaction” to Elliott’s proposition.
“As we drew closer to the AGM and continued to receive feedback, it crystallised our view that there was no clear consensus and the outcome of the vote would be finely balanced,” Forseke said.
“Even if the outcome had been a narrow decision in favour of the board’s recommendation, we felt we had to look beyond the vote and find the best way to provide certainty and clarity for the business.”Forseke, who has chaired the trust for the past three years, said it had spent £3m in the battle with Elliott, “but the board believes it’s important to have the appropriate professional advice”.
Around 250 shareholders gathered in the Gardyne Theatre at Dundee & Angus College yesterday and several were critical of the trust’s performance and the discount of its share price compared to its net asset value, which stands at about 13 per cent.
Roger Lawson, deputy chairman of shareholder association ShareSoc, said he had reduced his personal holding in Alliance due to “consistent underperformance” and queried the board’s tactics in trying to head off Elliott’s attempts to mount a board shake-up.
He said: “I was absolutely horrified by the amount of hot air and generally questionable allegations made by yourselves against Elliott and I thought it was a recipe for running up costs. I would have to ask the chair whether you’re considering resigning over this?”
Forseke replied: “I do not believe this referendum was about my chairmanship – it was about speeding up performance and delivering on our strategy.”
Alastair Kerr, chairman of the trust’s remuneration committee, received a round of applause when he said the board was “entirely supportive of the chair”, and only 3.18 per cent of votes cast were against her re-election.
One shareholder said the addition of City veterans such as Brooke and Macnamara to the board was like “appointing foxes to look after the hen house” and asked the board for more details about the new directors.
However, there was an angry reaction after Brooke, who was at the meeting, said: “I’ve got very little to say, because I have no knowledge of Alliance Trust other than what I have read in the press. But you can be absolutely assured that I’ll be completely independent of Elliott and will not be influenced by anybody.”