RIT Capital Partners, a large British investment trust chaired by financier Lord Jacob Rothschild, has been in discussions with its Dundee-based rival Alliance Trust, proposing a takeover in order to create a publicly listed company with a market value of over £5 billion.
The 55-year-old investment trust, which was worth £2.5 billion, has made an informal approach with Alliance Trust in recent weeks and remains interested in a merger with the Scottish business, which has a market value of £2.6 billion according to unnamed sources who were briefed on the matter.
Neither RIT Capital or the Alliance Trust gave comments on the issue. However, the Rothschild-chaired investment trust disclosed a stake of less than three per cent in its rival last year, according to UK regulatory filings.
RIT Capital’s acquisition of Alliance Trust, one of the UK’s oldest and largest trusts, would not only lead to a combination of two of the UK’s best-known investment trusts, one that is publicly listed closed-end fund that dates back almost 150 years and a type that allows investors to keep away from double taxation, but it would also end years of speculation over the future of the company.
It was too early to say what the takeover would mean for Alliance Trust but Roger Lawson, Deputy Chairman of the UK individual shareholders society, ShareSoc, said he could see the rationale behind the pending merger between the two investment trusts.
“Mergers of investment trusts can of course reduce overall costs as administration and investment management costs are spread over a larger asset base,” Lawson added.
A separate, large shareholder in the Dundee-based business, in addition, said that “the move makes sense. The board would now be much more receptive to offers given its new-found independence.”
RIT Capital’s business prospect has long been under pressure from Elliott Advisors, a US activist investor, to restructure. In fact, Alliance Trust has already overhauled its leadership last year, appointing two of three independent directors nominated by Elliot after the activist investor made a public campaign about the company’s poor performance and corporate governance.
Alliance Trust, in addition, spent £3 million in an attempt to defend itself against Elliot, arguing that its leadership would “threaten the very existence of the company.”
The company has also ousted Katherine Garrett-Cox, its chief executive officer, and Karin Forseke, its chairman, who was replaced by industry veteran Robert Smith, someone who would be able to help lead a turnaround in the business.