Reaction: Alliance Trust status quo ‘no longer an option’

The companies announced this morning two of Elliott’s proposed non-executive directors Anthony Brooke and Rory Macnamara would be added to the board of the trust as part of a truce just a day before the annual general meeting in Dundee.

Several commentators have noted the fact an agreement was reached must have meant Elliott was likely to have amassed a significant amount of support for its proposals, proof that something had to change.

“This is a sure sign that having seen the scale of proxy votes from shareholders mounting up in favour of a shakeup, the board has rightly determined compromise is better than a very public defeat,” said Jason Hollands, a managing director at Tilney Bestinvest.

“The status quo is clearly no longer an option but the first vital step is for a de-escalation of tensions after the war of words of recent weeks.”

Charles Cade, investment trust analyst at Numis, said he thought Elliott had agreed a compromise as it would have recognised “ontinued hostility is unlikely to be the best way forward”.

“Even with three new independent directors on the board, there was no guarantee that action would be taken to improve performance or tackle the discount,” Mr Cade said.

“It will now be easier for the new directors to integrate with the existing board members, and Elliott will have greater input in the selection of a third new director in due course.”

Mr Cade added though, in spite of the truce, this was “unlikely to be the end of the story”.

“The agreement buys Alliance Trust 12 months’ freedom from any Elliott requisition, and we believe that a hostile approach from another management group is now far less likely,” he said.

“Nevertheless, there remains significant pressure on the managers/Board to turn around investor sentiment towards the stock.”

Paul Locke, investment trust analyst at Investec, said Alliance’s change of heart seemed to have “stemmed from shareholder feedback” with chairman Karin Forseke “now welcoming ‘as a considerable asset’ the significant experience of the new board members”.

“This is quite a change and one that has certainly been welcomed in terms of pricing in early trade this morning,” Mr Locke said.

“The board has also announced an accelerated move to appoint a further additional non-executive director as previously announced. This morning’s volte-face would certainly suggest that Elliott was in the ascendancy in terms of shareholder sentiment and potentially the actual vote.”

Hargreaves Lansdown senior analyst Laith Khalaf said he thought Elliott would be “significantly happier with this truce than the board of Alliacne Trust”.

“The agreement at least draws the matter to a close, and prevents any further public bickering for at least a year,” he said.

“However investors may justifiably feel a bit miffed. Some of them will have taken time to examine the issues before casting their vote, only to have the decision taken out of their hands at the last minute.

“They also have to contend with the uncomfortable fact Alliance Trust has told them the two people it now plans to appoint to its board are not independent.”

“The key question for investors remains whether the recent changes made by the trust will lead to improved performance. On that score, the jury is still out.”