So much for Katherine the Great. Katherine Garrett-Cox, the Alliance Trust chief executive, has capitulated at the eleventh hour to the agitators from Elliott Advisors. The US hedge fund, waving a 12% holding, wanted three new faces on the board. Alliance has allowed two, Anthony Brooke and Peter Macnamara, despite spending the last month describing the nominees as short-termists who couldn’t be trusted to act independently. This so-called compromise heavily favours Elliott: from its point of view, two out of three ain’t bad.
Alliance’s board crumbled, we must assume, because it knew tomorrow’s vote in Dundee would not produce the hoped-for display of loyalty from the small army of retail investors. The whisper says the vote on the trio of Elliott-nominated non-executives was too close to call. Thus a negotiated retreat, and cancelled resolutions, became the board’s least bad option.
The terms require Elliott to refrain from agitating against the board and management until after next year’s annual meeting. There are also “certain mutual non-disparagement undertakings”. Since the shareholders can’t be trusted to see this novel document, they’ll have to guess as to the contents. Alliance, presumably, is not allowed to refer to Elliott’s taste for seizing Argentinian naval ships in disputes over debt. And the hedge fund, let’s guess, can’t shout about the unfairness of Garrett-Cox regularly collecting £1m-plus a year despite Alliance’s middling investment performance.
Next May, battle will be allowed to resume. In effect, it seems, a 127-year-old investment trust has given itself 12 months to demonstrate that it deserves to exist in current form. If not, the debate about outsourcing fund management to save costs will return with a bite. So, too, will be the idea of selling two subsidiaries.
Spare a thought for Alliance small shareholders. They thought they were being offered a real vote tomorrow and a chance to express an opinion on competing analyses. Instead, whether they like it or not, they must live with a settlement negotiated behind the scenes. Elliott’s nominees, they were told by the board, were merely yes men; but Brooke and Macnamara, who never uttered a word publicly to address the criticism, will be welcomed anyway.
At the weekend, Garrett-Cox was quoting Churchill and describing her confidence in victory. Ho, ho.
