ISS backs Elliott in battle with Alliance Trust

Elliott Advisors received a boost in its campaign to shake up the board of Alliance Trust after a leading shareholder group recommended voting in favour of the US hedge fund's confrontational proposal.

Institutional Shareholder Services, which advises investors in about 20 per cent of the UK stock market, backed the Elliott proposal to place three new directors on to the board. It said the move would be beneficial for the 127-year-old investment trust.

Elliott, which has built a 12 per cent stake in Alliance Trust to become its biggest shareholder, is arguing that the group has consistently delivered poor investment performance, while at the same time failing to keep costs down.

The vote will be at the trust's annual meeting in Dundee on April 29.

The three nominees are Peter Chambers, the former chief executive of Legal & General Investment Management; Anthony Brooke, a former executive at SG Warburg; and Rory Macnamara, a former director of Morgan Grenfell.

ISS said: "The addition of three candidates like Peter Chambers, with extensive management experience, Rory Macnamara, with extensive board and investment banking experience, and Anthony Brooke, with asset management and investment banking experience, would be beneficial for the company."

Katherine Garrett-Cox, chief executive of Alliance Trust, said: "This is a challenging and robust board. I believe we have the right people on the board and I do not see the need for the changes that Elliott seeks. I am very confident we can win the vote."

She has already faced down a previous campaign to oust the group's management in 2011.

However, there may be a clash of cultures between an aggressive US hedge fund and what is one of Scotland's 10 largest companies. Alliance Trust is strongly rooted in Dundee, where it has been based throughout its history.

<

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

ISS said that Alliance Trust had underperformed the UK investment trust's global sector and its most relevant peers over a period of time.

"Perhaps as a reflection of this performance, the company's shares have been trading at a wider discount to NAV [net asset value] than its peers," ISS said. "The company's consolidated costs have increased to a level that call into question the current complex, unusual structure with subsidiaries. This is even more acute when considering Alliance is one of the two largest companies in the sector."

ISS added: "They [the candidates] are considered to be independent (as assessed against the recommendations of the UK Corporate Governance Code) including being free from any commercial arrangements with Elliott.

"Support for the three nominees is considered appropriate to at least commence a discussion on the strategic alternatives available to the company. Furthermore, if elected the nominees will only comprise a minority element on the board and as such there is little concern that Elliott's interests will dominate the board's discussions."

Karin Forseke, chairman of Alliance Trust, said: "We're disappointed that the ISS report doesn't represent many of the facts that we provided to them when compiling their research and in particular does not reflect our concerns over Elliott's motives for proposing these candidates.

"There seems to be a lack of consistency in the report, which makes it hard to see which timeframes or comparator groups are being referred to. There also appears to be a lack of understanding of the investment trust sector, including the industry guidelines on reporting of costs.

"ISS is entitled to a view, but we hope that shareholders will reach their own informed decision, taking full account of the reasons why our board has made its recommendation to vote against the proposed candidates."

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation