LONDON (Reuters) - Alliance Trust, the investment firm recently tackled by shareholders over issues of governance, performance and strategy, has struck a deal to buy a stockbroking business in a move that threatens to reignite a row with rebel investors.
The proposed 14-million-pound ($22.1 million) acquisition of Stocktrade by subsidiary Alliance Trust Savings (ATS) accelerates its parent company’s movement into the provision of personal savings and sharedealing products.
The deal has the potential to add more than 48,000 new customers owning 4.6 billion pounds ($7.24 billion) of new assets, and to turn ATS’s current break-even profitability into “meaningful profit in 2016”, Alliance said in a statement.
News of the fresh investment in ATS comes just two weeks after Alliance, which is around 65 percent owned by private investors, defused a heated row with shareholders over the way the FTSE 250 trust is run and how its executives are supervised.
Some Alliance shareholders had signalled disapproval of the company’s expansion into the highly competitive personal savings sector and have demanded that the trust sell the subsidiary to focus on its core investment business.
In the statement, Chief Executive Katherine Garrett-Cox said the company was analysing “a lot of valuable feedback from shareholders” gained over recent months.
Alliance agreed to appoint two non-executive directors nominated by its largest investor Elliott Advisors, just a day before other shareholders were due to vote on the activist’s proposals.
Elliott then waived its right to publicly agitate against the trust’s board or management until after the 2016 general meeting.
The New York-based investor declined to comment on the acquisition of Stocktrade from Brewin Dolphin, but other shareholders were more critical.
“Having wasted 3 million pounds trying to oppose an AGM resolution that shareholders clearly wanted, Alliance Trust is now spending 14 million pounds building up a non-core business that shareholders have openly said should be sold,” investor Tim Ingram, who also served as a non-executive board member at Alliance until April 2012, told Reuters.
“I‘m afraid this is a further example of how the company is not being run in the interests of shareholders.”
ATS currently administers more than 7.2 billion pounds in assets for around 57,000 customers. Completion of the Stocktrade transaction is expected to take place towards the end of the third quarter of 2015.
($1 = 0.6351 pounds)
Reporting by Sinead Cruise; Editing by Simon Jessop/Mark Heinrich