Alliance Trust has published its rejection of Elliott’s proposals. for the sake of completeness we have reproduced the entire statement below but the thrust of it is that Elliott’s nominees wouldn’t be independent, would have a short-term agenda, might initiate moves that could threaten the dividend and the jobs of 250 Alliance Trust employees. They are also claiming that their performance isn’t as bad as Elliott is making it out to be. It will be interesting to see what response Elliott makes. Our eyes were also drawn to the headline in City AM this morning which seemed to be implying that Elliott’s nominees wouldn’t fit in well with Alliance’s forward thinking, diverse Board. This article was apparently based on a conversation with an anonymous Alliance Trust insider.
“The Board of Alliance Trust unanimously recommends that shareholders vote against Elliott’s resolutions
On 16 March, 2015, Alliance Trust PLC (“Alliance Trust” or the “Company”) announced that it had received a requisition notice from Elliott Advisors (UK) Ltd. (“Elliott”), an affiliate of a US based
activist hedge fund manager, requiring the Company to put forward additional resolutions at its forthcoming Annual General Meeting. These resolutions propose that Anthony Brooke, Peter Chambers and Rory Macnamara be elected as directors of the Company. Having given these resolutions and the statement which accompanied them due consideration, the Board of Alliance Trust has decided to unanimously recommend that shareholders vote against all of the resolutions, for the reasons set out below.
The Board believes that the proposed directors cannot be judged to be independent
Alliance Trust has clear and established processes in place to identify and appoint Non-Executive Directors to the Board who will act in the best interests of all shareholders. In contrast, Elliott instructed the search firm which identified the three proposed directors, and Elliott subsequently nominated them to be directors of Alliance Trust. Given that process, the Board is of the view that the nominees cannot be judged to be independent and is concerned that Elliott may seek to exert undue influence.
As part of its ordinary course Board planning, the Board had already planned to initiate a search for a new truly independent Non-Executive Director in the summer. In line with our usual approach, this will be based on a careful and thorough assessment of the needs and challenges of the business and include a broad, transparent and rigorous search drawing upon the support of external search firms.
Elliott’s interests are at odds with our other shareholders
Alliance Trust has maintained a regular dialogue with Elliott since it declared it was a shareholder in the Company in March 2011. Based on this interaction, the Board considers that, having nominated directors to the Company’s Board, Elliott would pursue a short-term agenda aimed at facilitating an exit from its shareholding in the Company. Given the size of its position, this would involve disruptive actions which are not in the long-term interests of our shareholders. For instance, Elliott has repeatedly proposed that Alliance Trust should launch a tender offer for 40% of its outstanding shares at a very narrow discount, which would require a significant liquidation of the Company’s assets. The Board considers that this type of action potentially threatens the very existence of the Company, and rides roughshod over our long-term shareholders, our customers and our over 250 employees.
Elliott has previously made clear to us that they see little or no value in the Company’s dividend distributions. In stark contrast, we understand from our regular meetings with shareholders that an increasing share price together with dividend income are the most important factors for the vast majority and are the key drivers of total shareholder returns (“TSR”), the metric used to measure our investment performance by our shareholders and market experts.
The Company already has a clear strategy and is well positioned to deliver for all shareholders
With this strategy in place, and with positive results already coming through, the Company expects to deliver the following for shareholders:
- Outperformance of the equity portfolio against its benchmark, delivered using a clear and differentiated investment strategy focused on sustainable investment from a team with a proven long term track record of outperformance
- Additional value drivers in other asset classes, including the subsidiaries
- A secure and consistently growing dividend
- Ongoing strict cost management
Alliance Trust adheres to high standards of corporate governance
As a Company focused on sustainable investing for the long term, we take corporate governance considerations extremely seriously. The Board maintains strong oversight of the executive team and is pleased with the Company’s recent performance. We are also proud of the diversity of our current Board, which is more than 40% female.
We are fully aware of a company’s need to address its shareholders’ concerns, and we absolutely refute the suggestion that we have not provided meaningful responses to Elliott on the matters it has raised. Alliance Trust is committed to ongoing shareholder engagement, maintaining regular dialogue with both our institutional shareholders and our retail shareholders trough investor forums, our CEO’s blog and other shareholder communication channels. However, Elliott’s implication that internal management appointments need to be discussed and approved by shareholders is not common industry practice.
Alliance Trust consistently delivers strong returns and Elliott’s criticisms of the Company are misguided
Alliance Trust’s total shareholder returns are top quartile since the new equities leadership team was put in place almost six months ago and are above median over 1 and 5 year periods. Since we first became aware of Elliott’s shareholding in the Company four years ago, Alliance Trust has delivered a 66% TSR, ahead of the Global sector’s 57% return. Underlying this performance, in that timeframe, Alliance Trust has also delivered a 52% NAV total return, in line with the Global sector. Furthermore, since Katherine Garrett-Cox took over as Chief Executive in 2008, Alliance Trust has generated a TSR of 92%, materially outperforming the Global sector average return of 76%. A key driver behind this has been the strong downward trend in Alliance Trust’s discount to NAV for the last four years, from 15.8% in 2011 to 12.5% in 2014. Alliance Trust continues to manage its cost base and reduced its ongoing charge ratio (“OCR”) to 0.60% in 2014 from 0.75% in 2013. This compares favourably with the average OCR for investment trusts in the Sector of 0.75% and places Alliance Trust in the bottom quartile of the peer group for this measure. Our OCR is calculated entirely in accordance with industry guidelines.
Alliance Trust’s subsidiary businesses provide valuable growth opportunities which the Board is confident will translate into significant shareholder value over the long-term. Alliance Trust Savings has grown assets under administration by over 50% since December 2011 to nearly GBP7bn today. Alliance Trust Savings has a distinctive flat fee charging model and is well placed to grow rapidly following recent and forthcoming changes in the savings and pensions market. Alliance Trust Investments has seen third party funds grow from GBP125m in December 2011 to GBP2bn today. The Alliance Trust Investments Sustainable Future fund range, successfully overseen by our new Head of Equities for the last 13 years, continues to perform impressively with seven of the eight funds ranking in the first or second quartile over a three year timeframe to date.”
UPDATE: Elliott’s rebuttal @ 11:23 on 20 March
Elliott Response to Alliance Trust’s Statement issued earlier today has been published. we have reproduced this in full below:
“Elliott notes today’s announcement by Alliance Trust plc (“Alliance Trust”, or the “Company”) that it does not intend to appoint or recommend the three new independent non-executive directors which were nominated by us on 16 March 2015.
We are long-term shareholders and are surprised and disappointed that the Company does not think it would benefit from the experience, integrity and independent thinking of Anthony Brooke, Peter Chambers, and Rory Macnamara. We believe that this decision is indicative of a Board that is out of touch with the concerns of its shareholders, and which needs fresh perspectives.
We are puzzled as to how the Board could have reached their conclusion without meeting or speaking with the candidates. The day before the requisition was made, Elliott notified the Company that we would make an announcement to that effect and stated our availability and interest in discussions. We have not received any response to our private invitation, and therefore publicly reiterate this invitation today.
This follows a pattern of non-engagement from the Company, starting with a number of letters to the Chairman from 22 December 2014 onwards which informed the Company that Elliott had begun to evaluate possible new candidates for the Board and that we stood ready to bring proposals directly to shareholders. In none of the Chairman’s responses were these proposals addressed, and no interest was shown by the Company in participating in our efforts to strengthen the Board for the benefit of all shareholders.
Elliott notes with regret that the Company has resorted to questioning the independence of three individuals with impeccable credentials and integrity, when the candidates have been identified by a leading external search firm and are wholly independent of Elliott, who had never met any of the candidates previously, and of Alliance Trust. We note that of the six independent non-executive directors appointed by the Company since we became shareholders, three have resigned from the Company ahead of serving a full three-year term, which makes us question the effectiveness of the Board’s own nomination process.
The Company’s statement also includes factually incorrect assertions about proposals which it claims Elliott has made, including mechanisms to reduce Alliance Trust’s persistent discount, and speculative assertions as to Elliott’s intentions. Elliott’s correspondence with the Board demonstrates their statement to be erroneous and misleading. The proposed directors will, if elected, form their own view as to what is in the best interests of shareholders in a manner wholly independent of Elliott.”
UPDATE: Alliance Trust’s rebuttal @ 15:18 on 20 March
Alliance Trust Response to Elliott Statement – reproduced in full as before
“The Board of Alliance Trust PLC (“Alliance Trust” or the “Company”) notes today’s statement by Elliott Advisors (UK) Ltd. (“Elliott”).
We continue to refute their ill-founded criticisms of the Company and will be addressing these more fully in a circular to shareholders to be sent shortly. However there is one important point that we feel compelled to draw to shareholders’ attention immediately.
Elliott’s statement of today refers to “factually incorrect assertions about proposals which it claims Elliott has made, including mechanisms to reduce Alliance Trust’s persistent discount”. The Board of Alliance Trust has minutes of meetings with Elliott, where Elliott repeatedly suggested that Alliance Trust undertake a tender offer for 40% of the Company’s shares at a discount of 5% or less. In one of these meetings Elliott also showed a presentation they had prepared to the Company which detailed their proposal for a tender offer.
Shareholders may also be interested to see the following paragraph from a letter sent by Elliott to the Company, dated 19 February 2015 and signed by Jonas Rydell, of Elliott:
“Based on our extensive experience in such matters, we offered your management the benefit of a high level review of the options available to it, should the Company wish to adopt it or should the resolution be passed. We presented a total of eight options and variations of discount control, and commented in each case on their effectiveness and benefits to different groups of shareholders. We showed, for illustrative purposes, the several hundreds of millions of pounds worth of value creation available to all shareholders (tendering and non-tendering) from a partial tender offer in cash at various discounts to net asset value, various levels of acceptance, and various levels of post-tender discount.”
Elliott’s criticisms of the Company and its comments on “factually incorrect assertions” are misleading. We are determined that they will not mislead our shareholders.”
UPDATE: Elliott’s rebuttal @ 16:31 on 20 March
“Elliott notes today’s second announcement by Alliance Trust plc (“Alliance Trust”, or the “Company”), reiterating its earlier misleading claim that Elliott has “repeatedly suggested that Alliance Trust undertake a tender offer” for its own shares. The Company’s statement selectively quotes from recent correspondence, but omits to mention that the letter was referring to a conversation in 2011, in the context of another shareholder (not Elliott) having put forward resolutions aimed at reducing the Company’s discount. In light of the Company’s decision to publish private correspondence out of context, Elliott has no choice but to publish the letter exchange with the Chairman in their entirety. They will be available on www.ImproveAllianceTrust.com shortly. For the record, unlike the requisitions which were put forward by other shareholders in previous years, Elliott has never formally proposed that the Company takes any particular course of action. Elliott’s requisition to add three new independent non-executive directors to the Board aims to improve corporate governance, and ultimately performance, for the benefit of all shareholders. The enlarged Board, if elected, would form their own view, independently of Elliott, of the future direction of our Alliance Trust.”
ATST : Alliance versus Elliott – with updates