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Round two: activist returns to Alliance Trust fight with 10% stake

by David Campbell on Feb 26, 2014 at 09:55

Round two: activist returns to Alliance Trust fight with 10% stake

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.    

3 comments so far. Why not have your say?

Anonymous 1 needed this 'off the record'

Feb 26, 2014 at 10:49

Alliance trust has had a change of investment style and this has led to a condensing of holdings however the trust continues to lag many of its peer group and at some stage investors will demand a change in management ....may be this is the activists time

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Anonymous 2 needed this 'off the record'

Feb 26, 2014 at 13:12

elliott are the smartest activist investor out there..they have taken on some big challenges in the past and usually come out on top..a different proposition to Laxey

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richard tomkin

Mar 01, 2014 at 14:09

What is the point of Alliance Trust? It boasts a pedestrian investment performance in recent years,and is devoting a disproportionate amount of time on its 'platform' subsidiary ATS.It knows it is virtually bid-proof,with 25% of shares owned by ATS investors.There is little incentive to change and little vision from the board.The discount is whopping.I have held the shares for about 10 years or so,always thinking that matters must improve!A case of patience going unrewarded.Many years ago,Globe Investment Trust,the biggest then fund,was taken over by NCB Pension Trustees.I hope somebody will put the Dundee Dinosaur under the hammer.

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