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Rothschild backs out of Alliance Trust takeover bid

Rothschild backs out of Alliance Trust takeover bid

An investment trust owned largely by Lord Jacob Rothschild has said it has “no intention” to make an offer to buy Alliance Trust.

Last week, Alliance Trust confirmed that RIT Capital Partners, which manages £2.4bn of assets, had made an “informal proposal” to merge the two companies.

It was suggested the merger approach, which was in the first stage of consideration, could have benefited both sets of shareholders.

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However, a statement from RIT Capital published on the London Stock Exchange today (7 June), reads: “Following careful analysis and constructive discussions with representatives of Alliance Trust, RIT has concluded that it would not be in the best interests of its shareholders to make an offer.

“The board of RIT respects the process which Alliance Trust are going through and wishes them well with their strategic review.”

The future of Alliance Trust has been under close scrutiny over the past year after the largest individual shareholder in the £2.7bn company, Elliott Advisors, said it was concerned about its internal management costs and underperformance against its peers.

Elliott Advisors called for a restructure of board members, which led to the departure of Alliance Trust chief executive Katherine Garrett-Cox.

Responding to today’s announcement from RIT Capital Partners, a spokesman for Alliance Trust said the board is implementing a “series of changes to enhance shareholder value”.

“This process is well under way and has already started to make good progress, lowering costs, narrowing the discount and allowing for the creation of a fully independent board of directors.”

In light of this, the trust will continue to suspend share buybacks until it has completed its strategic review.

RIT Capital’s shares have been up slightly today, which Stephen Peters, investment manager at Charles Stanley, said could suggest RIT investors were “not overwhelmed” by the prospective takeover.

Had the acquisition gone ahead, he said RIT would have needed to overcome a number of issues, such as taking control of the assets and selling off parts of the Dundee-based company.

“RIT as it stands is a well-managed trust and doesn’t really need Alliance Trust, whereas Alliance Trust needs to evolve rapidly.

“No one knows what the situation is and whether Alliance Trust wanted to play ball at this stage,” he said, adding perhaps it wanted to see what other options are out there.

“I think it generates an interesting debate in the market as to what investors want Alliance Trust to be in the future - whether they want it to be Alliance Trust but better, or be something different.”

Mr Peters added: “It has board members in place now who are more willing to embrace new ideas, and I am comfortable they have arrived at this decision in a sensible and logical way.”

katherine.denham@ft.com