Alliance Trust buys broking business from Brewin Dolphin

Alliance Trust made its first acquisition on Thursday following the feud with activist hedge fund Elliott as the Scottish group attempted to turn round performance and tackle problems at its underperforming subsidiaries.

Alliance Trust Savings, one of the two lossmaking subsidiaries of the Dundee-based group, will acquire Stocktrade, the execution-only stock broking business of wealth manager Brewin Dolphin, which will significantly boost market share and assets under administration.

US hedge fund Elliott has given Alliance chief executive Katherine Garrett-Cox a year to improve performance or face the axe after the investment trust's biggest shareholder forced the group to put two new directors on the board last month, ahead of a stormy annual meeting.

Ms Garrett-Cox said: "Our strategy for ATS is to grow the business organically, but when appropriate acquisition opportunities present themselves that fit with our stringent criteria then these will be assessed. The acquisition by ATS of Stocktrade is an example of us putting this strategy into action and pursuing our ambitious growth targets."

James Maltin, investment director at Rathbones, the broker and a shareholder in Alliance Trust, said: "This is a very good move on the part of Ms Garrett-Cox. It is part of her strategy to deliver profits at Alliance Trust Savings and fits with what Elliott had demanded."

Alliance Trust Savings, a savings platform for retail clients, could add close to 50,000 new customers and nearly £5bn of assets as part of the £14m deal. Ms Garrett-Cox hopes the group will now deliver "meaningful profit" by next year.

The acquisition has the potential to increase ATS assets from £7.2bn to more than £11.5bn and its customer base from 57,000 to more than 105,000, Alliance Trust said in a statement.

A top 20 shareholder said: "This will definitely provide synergies and improve profitability. It is a very sensible move and shows that Ms Garrett-Cox is fully taking on board the complaints of Elliott, although the deal has probably been in the pipeline for a while and before the disagreement with Elliott."

The New York hedge fund was engaged in a six-week battle with Alliance over placing new directors on the group's board, which culminated in a heated AGM on April 29. Alliance Trust announced the day before the meeting that it would place two of Elliott's proposed directors on the board in a last minute deal to prevent defeat at the meeting.

The problems of Alliance's two lossmaking subsidiaries ATS and Alliance Trust Investments, the group's investment management company, was one of Elliott's main complaints.

It wanted new directors on the board to beef up corporate governance and help raise performance at a group that is underperforming many of its main rivals, such as Foreign & Colonial Investment Trust and Witan Investment Trust.

Alliance also trades at a wide discount, a market gauge of performance, compared with other listed UK investment trusts.

Elliott, which has built up its stake in the trust to 12 per cent to become the biggest shareholder, was backed by three other large institutional investors: Aberdeen Asset Management, Legal & General Investment Management and Brewin Dolphin.

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