Alliance Trust Angers Investors Over $4.6 Million Elliott Battle

Alliance Trust Plc’s managers faced a room full of angry shareholders in Scotland after revealing that a failed battle with hedge fund Elliott Advisors cost the firm 3 million pounds ($4.6 million).

Alliance Trust admitted that appointing two of Elliott’s nominees to the board was a “U-turn” after waging a six-week public campaign against the idea, Chairman Karin Forseke told 260 investors at the firm’s 127th annual general meeting on Wednesday. It became apparent that striking a deal “was the best way forward,” she said.

Roger Lawson, deputy chairman of private investor lobby group ShareSoc, stood up at the meeting and asked whether Foreseke had considered resigning. Private investor Colette Clenghan said she was “extremely annoyed” that she didn’t get a chance to vote on these directors.

“Suddenly we have got two people on the board whom we have not voted for,” she said to the applause of others in the room. “What guarantees do you have that we won’t find ourselves in the same position after next year’s AGM.”

Forseke and Chief Executive Officer Katherine Garrett-Cox struck a late night deal on Monday with Elliott to name Anthony Brooke and Rory Macnamara as independent directors after facing mounting pressure from shareholders and corporate advisers to consider the $25 billion hedge fund’s proposal. The appointments weren’t put to a vote at the meeting.

“The cost is significant, it’s a cost we’d rather be without and will be borne by all of us as shareholders,” Forseke said at the meeting.

Accepting Elliott’s plan tabled six weeks ago “was not an option” and it was only after meeting with shareholders that Alliance’s position started to change, she said. The cost of the campaign equalled that spent fighting Laxey Partners about three years earlier, she said.

Elliott, which owns 12 percent of Alliance Trust, withdrew all three resolutions before the AGM and agreed not to “seek to agitate” until after the 2016 shareholder meeting. That gives the board at least 12 months to address the asset manager’s 12.6 percent discount to net asset value, which is more than double the average of its peers.

Brooke, one of Elliott’s nominees, attended the AGM in Dundee and admitted to shareholders that he had little knowledge of Alliance Trust other than what he’d read in the public domain.

“I am very pleased to be joining the board,” he said. “You can be absolutely assured that I will completely independent of Elliott and will not be influenced by anybody. That said, I am convinced that change is something that is necessary.”

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