Yahoo Finance Alliance Trust faces revolt over share buy-back 'favouritism’
An attempt by the investment fund Alliance Trust to put an end to years of turbulence will face protests from shareholders this week over alleged favouritism and conflicts of interest.
The Dundee-based company has asked investors to approve a £620m buyback deal with the aggressive US activist investor Elliott Management, which holds nearly a fifth of its shares. Alliance aims to buy back the shares in five tranches, allowing Elliott to cash in its stake more easily and ending its running battles with the board.
However, institutional investors are poised to vote against the plan at a general meeting on Tuesday, after a critical report from the voting adviser Institutional Shareholder Services (ISS).
In a note to clients, ISS said shareholders should reject the proposal “due to favourable treatment of the company’s largest shareholder… whilst others are not presented with a similar exit opportunity”. ISS highlighted the fact that Elliott will be able to offload its shares at the lowest discount to the net value of Alliance’s assets in five years.
Alliance has also been forced to defend the appointment of Willis Towers Watson as its equity portfolio manager, part of a plan to cut costs by outsourcing fund management. It sparked controversy and criticism from ISS, as Willis Towers Watson also advised the company during the strategic review that led to its own appointment.
Alliance told shareholders last week it believed there was no conflict of interest and that Willis Towers Watson’s role in the strategic review had been clearly defined. It is understood, however, that the decision has caused concern at some of the company’s largest institutional shareholders, who could vote against the proposal.
In a letter to ISS seen by The Sunday Telegraph, Alliance attacked the adviser’s analysis of the buyback and accused ISS of basing its recommendations on “factual inaccuracies”.
Opposition from ISS is a blow to Alliance’s hopes of a quiet end to one of the most difficult periods in its 129-year history.
Alliance told ISS the proposals had been positively received by others and that other shareholders were free to tender their shares to a buyback programme on comparable terms.
Opposition from ISS, which can sway a fifth of typical UK shareholder register, is a blow to Alliance’s hopes of a quiet end to one of the most difficult periods in its 129-year history. Beginning in 2010, the attack from Elliott on its performance, costs, executive remuneration and structure has triggered changes including the exit of chief executive Katherine Garrett-Cox.
Alliance will count on the fact it has a more diverse shareholder register than most large companies, with thousands of individual investors. ShareSoc, which advises small investors on voting, has backed the buyback saying it would “avoid future pressure” by Elliott and “appears to be at a fair price”.
