By Nishant Kumar
LONDON (Reuters) - Alliance Trust (L:ATST), one of Britain's oldest investment companies, has rejected shareholder proposals for a management overhaul, setting the stage for a battle with one of the world's highest profile activist investors.
Elliott Advisors, the largest individual shareholder in the Trust (L:ATST), is seeking support from fellow investors for the appointment of three new independent non-executive directors to the board, in moves the trust has branded "completely unacceptable".
The Trust told its shareholders that the proposed directors could not be judged to be independent and raised concern that the activist investor might try to exert "undue influence".
"Elliott's interests are at odds with our other shareholders," the company said in a statement.
"Elliott would pursue a short-term agenda aimed at facilitating an exit from its shareholding in the company. Given the size of its position, this would involve disruptive actions which are not in the long-term interests of our shareholders."
Alliance Trust shares were trading 0.2 percent higher at 525 pence on Friday.
Elliott, which owns 12 percent of the trust, has called for a vote on the boardroom shake-up at the company's annual general meeting on April 29. It flagged a "persistent underperformance", the costs of its investment management function and continued losses in its two operating subsidiaries as its key concerns.
Citing earlier interactions with the hedge fund, the company said Elliott wanted it to make a tender offer for 40 percent of its outstanding shares at a narrow discount.
Such a move required a significant liquidation of assets, potentially threatening the very existence of the company.
The hedge fund also saw little or no value in the Trust's dividend distributions, the company said, adding that its dividend policy was one of the most important factors behind the interest of a vast majority of its shareholders.
Alliance Trust is popular with income-seeking retail investors and increased the total payout last year by 14.3 percent to 12.4 pence, the 48th straight year of growth.
Calling Elliott's criticism of its returns "misguided", the company said the Trust's shareholder returns were top quartile since the new equities leadership team was put in place almost six months ago.
Elliott claimed earlier this week that the company's poor corporate governance and weak cost controls were behind a relatively wide discount of around 13 percent to its net asset value of some 3.3 billion pounds.