Elliott may not be seeking a quick exit
A key pillar of Alliance Trust’s defence against activist investor Elliott Advisors has been the contention the hedge fund is in it for short- to medium-term gains.
Alliance Trust argues the three independent, non-executive directors proposed by Elliott are “the thin end of the wedge” and the group is in fact looking for a quick and damaging exit.
Nobody can know what is in the minds of Elliott’s investment managers, but there is evidence that the group does take long-term positions.
The hedge fund began building a stake in US energy company Hess in 2012 and in January 2013 it proposed to add five new directors to the board in a situation resembling its activism on Alliance Trust.
A public battle ensued and, subsequent to Elliott’s proposals, Hess’s senior management proposed five of its own directors to replace five existing members, as a way to appease investors.
The outcome was an 11th-hour agreement in May 2013, which saw the five Hess nominees put on the board and three of Elliott’s candidates added too.
The board also elected a new chairman – Mark Williams, a former head of marketing and refining for Royal Dutch Shell, who was one of the Hess nominees.
This meant a total of nine members of Hess’s 14-strong board were replaced, including one director who joined in March 2013.
According to reports from the Financial Times at the time, the change followed a long period of stasis, as before the change no independent director had left the Hess board for more than 10 years.
The shares traded at $55 on January 4 2013 and reached a high of $101 in August 2014, data from Google Finance shows. The drastic falls in the price of oil have had an impact on the stock, and it now trades at $77 (£50.88).
Elliott is still a major shareholder in the business, even though it could have sold out when the shares were at $100 – doubling its money.
The Financial Times reported at the time of the battle that both investor advisory firms Institutional Shareholder Services (ISS) and Glass Lewis backed the directors nominated by the hedge fund.
The stance by Elliott has been backed by similar European institutions in terms of its battle with Alliance Trust, with Pirc and ISS throwing support behind the group.
Alliance Trust has received support from many of its private investors and was also given a boost when major shareholder DC Thomson spoke out, confirming it would back the status quo.
Hess Corporation is an American integrated oil company headquartered in New York City, and a Fortune 100 corporation.
The company explores, produces, transports, and refines crude oil and natural gas.
