Rothschild in swoop on troubled rival Alliance Trust

INVESTMENT giant alliance trust yesterday revealed it has been approached by a rival about a possible tie-up.

the Dundee-based company said Jacob rothschild’s rit Capital Partners ‘has approached with an informal proposal for a merger of the two companies’.

rit is chaired by lord rothschild, the fourth baron of the rothschild family, which owns 21pc of the firm.

Combined, the two investment trusts would be worth £ 5bn and would manage more than £5bn of savers’ cash.

alliance trust told shareholders that an unsolicited approach had been received but that no detailed terms had yet been provided about a potential deal. the firm also revealed that it had called in advisers for a strategic review of the company, following a number of significant changes which have already taken place.

alliance trust has been under pressure from activist investors who have criticised its performance and the pay packets of senior staff.

Following pressure from activists, including Us-based Elliott advisors, the trust underwent a change of leadership with chief executive Katherine Garrett-Cox stepping down earlier this year. alliance said it is undergoing a review to continue the ‘process of development’. in a statement it said: ‘the company wishes to thoroughly explore all options available to it for the long-term benefit of shareholders and therefore expects the strategic review outcome may not be determined for some months.’

it added: ‘the board will incorporate any formal merger proposal received from rit into its strategic review, alongside the other options being considered.’

alliance trust said that following the approach it is now in an ‘offer period’ so will suspend share buy backs. Under the City Code on takeovers and Mergers, rit Capital Partners has 28 days – until June 27 – to announce a firm intention to make an offer.

rit Capital Partners and alliance trust are top performing investment trusts and both currently rank in the top 25pc of their respective peer groups. they have generated a return for their investors of 36.5pc and 50.2pc respectively over the past five years. rit did not comment last night.

alliance trust shares closed at 508.5p before the bank holiday, while rit was at 1619p.