US hedge fund Elliott in threat to Lord Rothschild's tilt at Alliance Trust

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US hedge fund Elliott could trip up Lord Rothschild’s proposed takeover of one of the UK’s oldest investment trusts by demanding an all-cash bid for the company. 

Rothschild’s investment vehicle RIT Capital Partners has confirmed it was examining a potential tie-up with Dundee’s 128-year-old Alliance Trust but it was at a “very preliminary stage of consideration”.

RIT has until 27 June to make an offer or walk away. 

Elliott wants to exit its 16% Alliance stake, worth £436 million, but is likely to push Rothschild for cash rather than shares, a move which could prove unpalatable for RIT’s prudent investment strategy. 

Alliance said: “No detailed terms have been provided by RIT with regard to the proposal or in respect of the company’s two principal operating subsidiaries.” 

A tie-up would create the UK’s biggest investment trust with assets of £5.3 billion although a merger of the two group’s heavyweight boards could also prove a hurdle given it would cull some of the City’s grandest names. 

RIT’s board includes two members of the Rothschild family, former Merrill Lynch executive Michael Marks and the Duke of Wellington while Alliance is chaired by Lord Smith of Kelvin. 

Alliance’s funds supermarket subsidiary Alliance Trust Savings and fund manager AT Investments could also prove an obstacle.

“In practice, mergers are very rare. Alliance’s board are keen to keep the identity of the company,” Numis analyst Charles Cade said. “It would have to be a partial cash exit for Elliott although RIT is in a good position to carry out a merger.” 

US hedge fund Elliott, which was founded by well-known Wall Street tycoon Paul Singer, has a stronger hand at the negotiating table after a 12-month ceasefire on meddling with Alliance’s strategy ended this month. 

Alliance’s board is undergoing a review of the group after a long period of turmoil which included the exit of well-known boss Katherine Garrett-Cox and an overhaul of its structure.


The board hosts a roster of new faces, with the most recent addition, non-executive Clare Dobie, arriving last week. Lord Smith joined in February. 

The makeover followed an activist campaign by Elliott, which won two seats on the board after a bruising battle with Garrett-Cox last year. 

The review, expected to take “some months” and led by Canaccord Genuity, will include Rothschild’s merger proposal in the list of options for the group. Shares in RIT fell 1.2% in response to the planned tilt at Alliance. Alliance shares added 3.6%.

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May 31, 2016 |
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