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Elliott wants three new faces installed

Alliance poised for shake-up as activist demands trio on board

Katherine Garrett CoxInvestment giant Alliance Trust faces a top level shake-up after activist investor Elliott Advisors named three City heavyweights it wants to put on the board.

Elliott is a New York hedge fund which has a track record of challenging management at National Express, Game Digital and Morrisons. It holds 12% of Dundee-based Alliance and wants to parachute three global financiers on to the board as non-executive directors at the firm’s agm on 29 April.

They are former BZW and Warburg investment banker Anthony Brooke, former chief executive of Legal & General Investment Management and Framlington, Peter Chambers, and former corporate financier at Morgan Grenfell and Lehman Brothers Rory Macnamara.

Elliott said they were selected from a short-list drawn up by headhunters Spencer Stuart and were totally independent having never worked with the New York-based investment fund before.

Alliance issued a statement saying it “will consider the resolutions in detail and advises shareholders to take no action at this time.”

The campaign marks the start of a potentially explosive battle for control of the £2.8 billion trust headed by chief executive Katherine Garrett-Cox (pictured).

In a statement, Elliott said its latest move is the culmination of previous failed attempts to engage with the board on matters of corporate governance and performance.

“We have not been met with any meaningful response which addressed those concerns substantively,” said the statement.

“We have therefore concluded that in order for Alliance Trust to improve its performance, for the benefit of all shareholders, the Board would benefit from added expertise, experience, and a fresh perspective.

More specifically, our concerns include

(1) the persistent underperformance of Alliance Trust’s investment portfolio against its sector peers and relevant benchmarks;

(2) the high and inflexible nature of the cost of the trust’s internal investment management function; and

(3) the continuing losses in the company’s two operating subsidiaries, adding to the total costs borne by shareholders.  As a result, the company has among the highest discounts to intrinsic value among its relevant peers. We believe that the Board’s failure to address these concerns, and fulfil the company’s full potential, is indicative of a system of corporate governance which requires new impetus.

Representatives from Elliott have met Alliance’s executive and non-executive directors on numerous occasions since it first became a shareholder in 2010, and has talked regularly with other long term shareholders over the same period.

“Although we remain hopeful that the board will now seek to properly engage with us and embrace these proposals, we have decided to bring the matter directly to shareholders for their consideration.  We look forward to communicating with fellow shareholders in the weeks ahead.”

This is the second battle fought by the board in recent times, having faced another activist shareholder Laxey Partners, four years ago.

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