Alliance Trust appeared to be gearing up for its second major battle with an activist investor in as many years, with former sparring partner Elliott International doubling its stake in the fund.
The US-based vulture fund upped its stake in the business through CFD exposure from 27.94 million shares to 56.12 million, or 10.02% of the market cap.
‘[Elliott] has deep pockets and we believe that this raises the prospect of hostile corporate action as it may not be easy to trade out of such a large stake,’ said Numis analyst Charles Cade.
'History suggests that it is not a group that should be taken lightly by Alliance Trust’s board.'
Excluding the 25.63% of shares held internally, that makes Elliott by far the largest holder of the trust, well ahead of publishing group DC Thomson’s 6.01% pension fund stake.
Elliott International was a supportive – if silent - partner in Laxey’s 2012 attempt to force Alliance Trust to install tighter discount controls and consider external asset management.
At the time the two hedge funds held around 5% of Alliance Trust shares. Their attempt to force an AGM motion fell flat, in a victory for chief executive Katherine Garrett-Cox widely attributed to inertia among the £2.8 billion trust’s widely dispersed shareholder base of retail savers.
In contrast to other activists Elliott International largely eschews the press. Such a significant increase to such a sizeable level is likely to be read as pointed, however.
Having dipped in the past month, shares in Alliance currently trade at a 12.5% discount to NAV. Over the last three years the trust has returned 23.9% versus 26.5% on the FTSE World index.
A scan of the shareholder register suggests that on this occasion Elliott may be acting alone, with no other obvious activist funds.