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Alliance Trust: a victory for shareholder activists

Alliance Trust’s surrender marks the biggest victory yet for shareholder activists in Britain.

Alliance Trust, Britain's biggest investment trust, has reached a last-minute deal with Elliott Advisors, a US activist hedge fund that is the trust's largest investor. Elliott, irked by what it viewed as high fees, an inflated salary for the chief executive and poor investment returns, had led a campaign to bring fresh blood into the board.

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A vote on its proposals was scheduled for the trust's annual general meeting on 29 April. However, a day before the AGM, Alliance headed off the vote by agreeing to put two of Elliott's three nominees on the board in return for a ceasefire until next year's annual meeting, in May 2016.

What the commentators said

Last weekend, Alliance's CEO Katherine Garrett-Cox was quoting Churchill and looking forward to victory. That was "asking for trouble", said Alistair Osborne in The Times. She folded after the first sign of defeat.

The deal, which saw a 12.2% shareholder get most of what it wanted, reflects how support for Garrett-Cox must have been draining away. She and the board realised that she was going to lose the institutional shareholder vote, representing around 30% of the total, while the vote from retail shareholders was on a knife-edge.

"A negotiated retreat became the board's least embarrassing option," said Nils Pratley in The Guardian. There will now be a truce lasting a year. So in essence the 127-year-old trust "has given itself 12 months to demonstrate that it deserves to exist in its current form".

All the important issues, ranging from the trust's discount to high salaries and distracting subsidiaries, will now at least be discussed, which bodes well for investors hanging on, as MoneyWeek's Merryn Somerset Webb noted in her blog. "The shares might offer some value."

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