Alliance Trust combining with Witan to form FTSE 100 company

Alliance Trust (LSE:ATST) and Witan (LSE:WTAN) have proposed to join forces to create Alliance Witan, which will swell net assets to around £5 billion.

Alliance Witan will adopt Alliance Trust’s investment strategy of investing in external fund managers that pick 10 to 20 of their best stock ideas. Both Alliance Trust and Witan have multi-manager structures in which stock picking is outsourced. The combination is expected to see Alliance Witan be of sufficient size to enter the FTSE 100 index.

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Due to being highly diversified and investing globally, both Alliance Trust and Witan are considered as being potential ‘one-stop shops’ for beginner investors. 

The combination has come about following Witan’s longstanding chief executive Andrew Bell announcing in March that he will be retiring during the coming year. This prompted Witan’s board to review the company’s future management arrangements.

If given the green light by both sets of shareholders the combination will lead to a continuation of a progressive dividend policy. Both Alliance Trust and Witan are ‘dividend heroes’ with 57 and 49 years of consistent dividend increases. The duo are two of the UK’s oldest investment trusts, established in 1888 and 1909 respectively.

In the announcement it was pledged that Alliance Witan will increase its third and fourth interim dividends for the financial year ending 31 December 2024 to be in keeping with the interim dividend payments currently being paid to Witan shareholders. This is currently estimated to represent an increase of 2.6% on the first Alliance Trust interim dividend of the current financial year, and a 7.1% increase on the fourth Alliance Trust interim dividend for the year ended 31 December 2023.

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Another benefited highlighted was that Alliance Witan is expected to have a lower annual fee due to its bigger size, which allows for economies of scale to be passed on through lower charges.  

Andrew Ross, Chair of Witan, commented: "Since Andrew Bell announced his intention to retire, we have been through an extensive process to identify the best candidate to take on the management of our shareholders’ assets. The board assessed a number of very strong proposals, including single-manager candidates with impressive track records. However, the board was unanimous in recommending the combination with Alliance Trust, which allows the continuation of our multi manager approach at lower fees and in a larger, more liquid vehicle.”

Dean Buckley, Chair of Alliance Trust, said “the formation of Alliance Witan brings together the two leading open-architecture multi-manager investment company propositions in the UK to form a FTSE 100 equity investment vehicle with the quality, cost efficiency and profile to play a leading role in the UK investment market.”

Buckley continued: “Shareholders will benefit from access to the proven investment process implemented by our investment manager, Willis Towers Watson, and access to the world’s leading stock pickers. This is also a significant moment for our industry in broader terms – Alliance Witan represents a key milestone in the history of the investment trust structure which has demonstrated its capabilities very effectively over many decades.

“Witan was an early adopter of the multi-manager solution and, on behalf of my Board, we congratulate Andrew Bell and his team on all that they have achieved during their tenures.”

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Seven years ago Alliance Trust changed fund manager and strategy, moving to a multi-manager structure. Under the management of Willis Towers Watson (from the beginning of April 2017 to 31 March 2024), its net asset value (NAV) total return was 104.2% against 95.7% for the MSCI All Country World Index (Alliance Trust's benchmark).

In terms of share price total returns over the past five years Alliance Trust has notably outperformed Witan, up 68.5% versus 40.1%. Alliance Trust also has a smaller discount of -5.6% compared with -7.8% for Witan. 

It is anticipated that shareholders will vote on the proposed combination in September. 

The proposed creation of Alliance Witan is part of an increased trend of investment trust consolidation. So far in 2024 investment trust mergers have hit a record yearly high, with six completed and another in the pipeline. This surpasses the previous record of five mergers, which was set in 2021 and 2022. Our news analysis feature took a look at the reasons why investment trust boards have become more proactive.