LORD Smith of Kelvin, chairman of Alliance Trust, has declared the retention of hundreds of jobs in Dundee had been a key factor in the deal which the saw the investment firm sell its pensions and savings unit for £40 million.
Dundee-based Alliance Trust offloaded its Alliance Trust Savings (ATS) subsidiary to Interactive Investor in a deal which brings together two of the biggest players in the UK fixed-fee market.
The terms ensure that the 300 staff employed by ATS will continue to be based on Dundee, with Interactive Investor having acquired the building they operate from in the City of Discovery.
The sale comes around four months after it was reported that ATS had been blighted by customer service difficulties in the wake of its £14m acquisition of Stocktrade, the “execution only” division of Brewin Dolphin, in 2015.
ATS incurred high costs as a result of the deal, down mainly to the transfer of the Stocktrade operations from Edinburgh to Dundee and steps taken to improve customer service levels which began in 2017.
Reporting its annual results in March, Alliance Trust wrote down the value of ATS by £23.5m to £38m, with ATS having taken on an additional 100 staff to get its technology problems under control.
The £3 billion Alliance Trust said the ATS sale was a “positive step” in its strategy to focus on its global equity portfolio. The venerable investment house, whose roots stretch back to 1888, noted that ATS represented 1.3 per cent of the trust’s portfolio at June 30. It said ATS had a fair value of £38m and its Dundee building a value of £4.9m at that date.
The current strategy was ushered in after a campaign for change led by activist investor Elliott Advisors in 2015.
Following a strategic review led by Lord Smith, Alliance Trust outsourced its fund management to Willis Towers Watson in 2017. The deal saw the management of £3.5 billion of assets split between individual managers based in London, Canada and the US.
Alliance Trust also sold Alliance Trust Investments, which focused on sustainable investments, to Liontrust Asset Management around the same time, and recently agreed to sell most of the trust’s private equity assets.
Lord Smith said of the ATS sale: “The board is pleased to announce the sale of ATS to Interactive Investor. The two businesses are highly complementary and ATS customers, many of whom are Alliance Trust shareholders, will benefit from Interactive Investor’s similar low flat-fee structure, as well as its increased scale and focus. A key consideration for the board was a commitment to maintaining ATS’ presence in Scotland. We are therefore very pleased that ii (Interactive Investor) plans to invest in ATS’ Dundee operating centre.”
Alliance Trust said the proceeds from the ATS sale will be invested in its global equity portfolio, managed by Willis Towers Watson. That portfolio will represent close to 100% of the trust’s investment portfolio following the sale. The deal, which is subject to approval by the Prudential Regulation Authority and the Financial Conduct Authority, will increase assets under administration at Interactive Investor to £35 billion. It will have around 400,000 customers with ATS accounting for £15bn of those assets and 100,000 customers. There are also around one million users of Interactive’s online services, including free media content.
Richard Wilson, chief executive of Interactive Investor, said: “This is another important step in our ambition to build the UK’s best investment platform.
“The acquisition brings together the country’s two largest fixed price providers, adding significant scale to ii (Interactive Investor), and reinforcing our ability to deliver excellent choice, value and service to all our customers.”
Shares in Alliance Trust closed up 3p at 730p.
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