A battle between U.S. hedge fund Elliott Management Co. and a
126-year old British investment trust turned nasty on Friday after
both sides published recent private correspondence between them and
accused each other of misleading shareholders.
In a series of letters between Dec. 22, 2014 and March 2, 2015,
Elliott portfolio manager Jonas Rydell accused Karin Forseke, chair
of Alliance Trust, of a "seemingly fixed attitude" in refusing to
consider Elliott's proposals to shake up the company.
In turn, Ms. Forseke accuses Mr. Rydell of "inaccurate and
misleading" statements regarding the Trust's performance.
The fight reflects a clash of cultures between the New
York-based activist fund and the British trust, many of whose
shareholders are long-standing investors in the firm. While
activist investors in the U.S. commonly engage in public battles
with the companies whose shares they own, such open conflict is
much rarer in the U.K. and Europe.
Alliance Trust initially published an extract from the letters
between the two firms Friday, saying it showed that Elliott was
trying to mislead shareholders. Elliott snapped back later in the
day by publishing what it said was the entire correspondence.
Alliance Trust is one of several U.K. investment trusts that own
stakes in a portfolio of other businesses. They appeal to some
investors because they can deliver a steadier income stream than a
normal fund, retaining dividends from a range of investments and
paying them out gradually.
Elliott has been an investor in Alliance Trust since 2011 and is
the firm's biggest shareholder with a 12% stake.
The value of Alliance Trust's shares have risen 53% since
Elliott bought in, but the hedge fund argues that they should have
risen by more given the performance of its underlying
investments.
The hedge fund has recently lobbied for changes at Alliance
Trust, including tabling a proposal to add three new nonexecutive
directors to Alliance Trust's board, to be voted on by shareholders
next month. Alliance Trust is opposing the proposal.
Alliance Trust says Elliott is trying to force it to buy back
its shares at a high valuation. Elliott says it hasn't discussed a
share buyback since 2011, when it was one of a list of suggestions
made by another activist fund that targeted the trust.
In one of the letters published Friday, Mr. Rydell accuses
Alliance Trust of trying to preserve a "lucrative remuneration
structure" favorable to the board and management.
Ms Forseke replies: "The company has delivered consistently
strong shareholder returns and I again refute your suggestion that
we are failing."
Write to Juliet Samuel at juliet.samuel@wsj.com
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