Alliance Trust's eleventh-hour truce with hedge fund Elliott Advisors heads off AGM showdown

One of the most high-profile proxy battles ever seen in the City has come to end as Alliance welcomes two of three Elliott candidates to board

Alliance Trust has reached an eleventh-hour compromise with its largest investor, the New York hedge fund Elliott Advisors, to avoid a bruising showdown at its annual meeting in Dundee.

One of the most high-profile proxy battles ever seen in the City came to end, for at least a year, when Alliance agreed to welcome on to its board two of the three City figures nominated as directors by Elliott Advisors – the £2.9bn investment trust’s largest shareholder with a 12 per cent stake.

In return, Elliott has dropped the three resolutions it put up for the shareholder meeting and agreed to vote with the board on all the other matters being put to investors. In a highly unusual move both Elliott and Alliance have agreed not to make public criticism of each other for a year and a day, until after next year’s annual meeting.

Laith Khalaf, a senior analyst at Hargreaves Lansdown, said: “I suspect Elliott will be significantly happier with this truce than the board of Alliance Trust. 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.”

The ending of hostilities will raise question marks over the future of Alliance’s chief executive, Katherine Garrett-Cox, and its chairman, Karin Forseke. Elliott had not called for their removal and said it was happy to work with them in improving the trust’s investment performance.

However, Ms Garrett-Cox’s pay – she received £1.34m last year – became a major focus of discontented shareholders during Elliott’s campaign. It is still likely to be the subject of intense questioning when as many as 400 shareholders are expected to turn up to the meeting in Dundee.

Both sides admitted that the proxy votes on Elliott’s three nominations were too close to call. Last-minute talks on Monday resulted in the compromise, which will see Anthony Brooke and Rory Macnamara join the Alliance board as soon as they have regulatory approval.

The third Elliott nominee, Peter Chambers, has stood aside as a candidate, but Alliance will still appoint one more new independent director. Until now, Alliance had opposed all three of the Elliott nominees on the grounds that they would not be truly independent.

The hedge fund said: “We are pleased to have reached an understanding with Alliance Trust and look forward to following the enlarged board’s progress on strategic and business matters over the next year and beyond. Elliott acknowledges and appreciates the widespread engagement and support from fellow shareholders of the company and others in recent weeks. We believe that this solution is in the best interests of all shareholders.”

Ms Garrett-Cox has previously fought off two attempts by the rebel investor Laxey Partners to oust her. Former Alliance Trust director Tim Ingram said he was delighted with the outcome. “It’s a shame [the Alliance board] have been so out of touch with shareholders,” he added.