Subject to approval by independent shareholders at the general meeting on 28th February, the deal will go through in five equal tranches, each at a 4.75% discount to the prevailing net asset value. It is expected to result in a 1% rise in the NAV of the trust for other existing investors.
Alliance Trust said its board believes “the proposed repurchase is in the best interests of the company and its shareholders as a whole.”
The deal ends a long-running battle between Alliance Trust’s directors and the US-based firm over the strategy and board make-up.
Elliott Associates gradually built its stake in the investment trust over seven years, ultimately becoming the largest shareholder by a distance and using this position to influence matters within the business.
This latest big change at Alliance Trust follows soon after it announced a reshuffled asset management line-up.
“Elliott has totally transformed Alliance Trust and turned a tidy profit into the bargain, though it remains to be seen whether the changes deliver long term value for shareholders,” noted Laith Khalaf, senior analyst at Hargreaves Lansdown. “However the discount has narrowed significantly, and on paper the new investment strategy looks like an improvement.”
“The withdrawal of Elliott is also positive for remaining shareholders because it will boost the NAV of the trust, and will hopefully lead to some much needed stability in terms of strategy,” he continued. “The trust will shrink in size as a result of Elliott’s withdrawal, and as a result the annual charges paid by investors will be modestly higher than previously expected. It’s now time for the trust to do some talking on the pitch, and start delivering some outperformance for investors with its new all-star manager line-up.”
“Overall, I think that the repurchase is helpful in that it removes a clear overhang in Alliance Trust’s stock,” said QuotedData senior analyst Matthew Read. “The trust is trading at a c 5% discount anyway, which is much tighter than discount’s it has previously traded, which reflects the progress it has made in recent years and is arguably in response to the pressure that Elliott has applied. By allowing Elliott out at a discount close to where the trust is trading, they’re not being given much of an advantage to which other shareholders don’t have access. Elliott get the benefit of certainty around an exit and remaining shareholders get a c 1% uplift in NAV so everyone benefits.”
