Alliance Trust pins faith in investor ‘passion’

Elliott has accused Alliances bosses, led by chief executive Katherine Garrett-Cox, right, of lacking openness. Picture: Jane Barlow

It was reported yesterday that Legal & General Investment Management (LGIM) and Aberdeen Asset Management (AAM) were poised to back rebel shareholder activists in the vote. LGIM and AAM own 2.5 per cent and 1.5 per cent of Alliance Trust respectively.

The American hedge fund, Elliott Advisors, is asking this Wednesday’s AGM to vote for three new non-executive directors to sit on the board of the trust, which it claims has significantly under-performed over the past one, three and five years.

But Karin Forseke, Alliance’s chairman, told The Scotsman ahead of the shareholder meeting in Dundee’s Gardyne Theatre: “Several people have told me not to worry about this, that it’s going to go fine, and while we believe we have a lot of support, one of the most important issues for us that people do come out and vote.”

Private investors are estimated to hold between 65 per cent and 70 per cent of the Tayside trust’s shares and are seen as pivotal to the outcome of the vote.

However, Elliott is the biggest single shareholder, with 12 per cent, and influential shareholder advisory groups Pirc and ISS have thrown their weight behind the hedge fund.

Elliott has accused Alliance’s bosses, led by £1.4 million-a-year chief executive Katherine Garrett-Cox, of “lacking openness” and demanded new directors to give a fresh perspective on the way the trust operates. Garrett-Cox has defended the trust’s performance and has declared she will not be “bullied” into new strategies.

One City analyst said yesterday: “We had heard the strong rumours that LGIM and Aberdeen Asset Management were going to back the proposals for the new directors.

“It is not for the size of their relatively small stakes that they are important in the issue, but such well-known names might sway other votes if they speak at the AGM. It is a highly fluid situation, too close to call.”

One source said: “Retail shareholders are at the heart of this thing. And it’s a shareholder base that has been through this sort of thing before.

“It is always a passionate shareholder meeting, a fantastic event. The company normally gets several hundred people attending at the least.

“It is bound to be an emotional occasion and I’m sure the current Alliance board would hope those shareholders would express their views. Directors cannot do much about what other institutional shareholders might do. That is up to them.”

Alliance, which is valued on the stock market at £3.6 billion, and AAM declined to comment yesterday. LGIM was unavailable for comment.

Publisher DC Thomson, owner of the Beano children’s comic and also based in Dundee, defended Alliance’s board recently, saying it saw nothing in the US hedge fund’s proposals to persuade it to give the activists its backing. It has a 5.5 per cent stake.

Tim Ingram, a former director of the Alliance, has said Garrett-Cox is unwilling to outsource the portfolio’s management because it could have an impact on her pay.

It has been suggested that AAM chief executive Martin Gilbert would be very interested in taking on management of the Alliance investment portfolio, but it is understood that talks have never got beyond a highly informal stage.

Three years ago Alliance saw off another shareholder rebellion at the shareholder meeting, from activist investors Laxey Partners, which called for external fund managers to handle the group’s investments after what it branded “five consecutive years of consecutive under-performance”.

However, the proposal was comfortably voted down by shareholders.