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Alliance Trust attacks Laxey’s demands as Aberdeen circles
Alliance Trust has clashed with rebel shareholder Laxey Partners over its latest campaign to shake up the £2.1 billion global investment trust.
Dundee-based Alliance, whose chief executive is Katherine Garrett-Cox (pictured), has struck out at demands from shareholder activist Laxey Partners to boost the trust’s investment performance as ‘short-term’ and driven by self-interest.
The investment trust is under pressure from Laxey, a hedge fund, to outsource its fund management and narrow the average 14.5% discount at which its shares have traded at over the past year.
Rival investment groups are poised to throw their hats in the ring should Laxey's campaign provide a chance to take over Alliance. Martin Gilbert, chief executive of Aberdeen Asset Management, which runs Murray International , a popular rival to Alliance, told the Daily Telegraph: ‘Aberdeen would love the opportunity, if the board ever did put it out to tender, to pitch for the trust.’
Laxey’s original calls for Alliance to commit to automatic share buy-backs when the discount rose above 10% were rejected at last year’s AGM. However, the trust subsequently bought back £246 million, or 10.3%, of its shares in 2011, and Laxey was seen as having won a moral victory.
Laxey's latest campaign has exasperated Alliance. Today it fought back, urging shareholders to vote down Laxey’s proposals at its annual general meeting on 27 April.
In a letter to shareholders the trust claims that Laxey's latest proposals will not benefit investors over the medium and long term, and points out that it is committed to share buy-backs and increasing payouts, having made its biggest dividend increase in 20 years of 7% in 2011. It claimed Laxey's AGM campaigns would cost it a total of £2.5 million.
Karin Forseke, chairman of the Alliance Trust, said: ‘We are disappointed that Laxey has requisitioned the board again, having been convincingly defeated last year.
‘This persistent requisitioning wastes shareholders’ money and demonstrates Laxey’s short-term attitude to its investment. The board believes strongly that this resolution is not in the best interests of all shareholders.’
Laxey rejected this criticism. 'It is good to see they admit the success of our proposals to buy back shares and made £40 million for shareholders over the last financial year. How they have spent £2.5 million defending proposals they have then executed seems extraordinary but at least shareholders are vastly better off for the whole exercise.'
It welcomed Aberdeen's interest, saying Murray International's performance was 'vastly superior' to Alliance's and that its shares consistently traded at a premium. Commenting on a possible takeover of Murray for Alliance, Laxey said: 'What an upgrade for all shareholders that would be!'
George Crowe, investment companies research analyst at Numis, said Laxey's demands had been a mixed blessing for Alliance shareholders. ‘It will take time to change investor perceptions towards the stock, but in 2011 the fund outperformed its peers and it now has a much clearer strategy, in our view.'
He added: 'The upside is that if Katherine Garrett-Cox can deliver improved performance over the next few years, there is the potential for shareholder returns to be enhanced by a narrowing discount. The fund is never going to be an investment that “shoots the lights out” in a rising market… but then again that is not what Alliance Trust is trying to achieve.'
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by Gavin Lumsden on Dec 10, 2013 at 16:51