Dozen hedge funds eye bonanza as Rogers-Shaw deal nears close

Citadel Income Fund

27/01/2023 11:00

By Maiya Keidan and Nell Mackenzie
       TORONTO/LONDON, Jan 27 (Reuters) - As one of Canada's
most bitterly contested acquisitions nears the finish line, a
dozen hedge funds including Citadel and Millennium Management
are heaving a sigh of relief and sitting on profit of more than
C$216 million ($162 million) on paper after a nearly two-year
roller coaster ride.
    Prospects for Rogers Communications Inc's  RCIb.TO  C$20
billion bid for Shaw Communications Inc  SJRb.TO  brightened
after Canada's competition bureau this week dropped plans to
block the deal. While the Canadian government still has the
final say, most analysts and competition lawyers expect the deal
to clear the last hurdle and close by the Jan. 31 deadline.
    Rogers' bid faced antitrust risk from the start as the
country's top three telecoms operators account for 80% market
share. Still, hedge funds piled into Shaw, betting the deal
would go ahead. 
    Hedge funds that bet on mergers and acquisitions aim to make
money by buying shares in a company that is the target of a
takeover bid in the hope they will rise towards the offer price.
        Publicly available data does not show exactly when the
funds moved into the stock - some may have held the stock long
before the transaction was announced and stuck with it, granting
them an even bigger payday.
  
    The ride over the past two years wasn't one for the
faint-hearted as the competition bureau battled to keep the
transaction from going through, taking its case to Canada's
antitrust tribunal and a Federal Court of Appeal.
        But now, together, the 12 hedge fund firms have made
hundreds of millions over the nearly two-year period between
Mar. 15, 2021 - when the deal was announced - and Tuesday, when
the competition bureau dropped its attempts to block the merger,
according to Reuters' calculations using Refinitiv Eikon data.
The shares have risen 18% since the deal was first announced. 
    Billionaire Israel Englander's Millennium, the hedge fund
with the largest position in Shaw, would have made a C$44
million profit from its 7.59 million shares if it had held the
number of shares it currently holds for the full two years,
according to Reuters calculations. 
    A spokesperson for Millennium declined to comment.
    Kenneth Griffin's Citadel and 10 other hedge funds,
including Canyon Capital Advisors, Pentwater Capital Management
and Britain's Sand Grove Capital Management, were among the
firms that bet on the deal succeeding in spite of many hurdles. 
    POPULAR TRADE
    The 12 hedge fund firms together owned 7.05% of Shaw's
shares, or 33.6 million shares, according to Refinitiv Eikon
data.
    Spokespeople for Citadel and Sand Grove declined to comment
while Pentwater and Canyon did not respond to requests for
comment.
        Investor confidence in Canada's rule of law means local
deals are attractive to many merger arbitrage funds and large
multi-strategy funds, said Jim Neumann, chief investment officer
of alternatives advisory firm Sussex Partners.
  
    Millennium, for example, is a multi-strategy firm - meaning
it operates different hedge fund strategies.
    Hedge fund firms are also tracking other deals in Canada,
such as Ritchie Bros. Auctioneers'  RBA.TO  deal to buy IAA Inc
 IAA.N , public filings compiled by Refinitiv Eikon showed. 
    Sticking with the Rogers-Shaw deal required a great amount
of patience and conviction as the companies faced a protracted
ordeal to finalize the transaction and some hedge fund firms,
like British firms Marshall Wace and Odey Asset Management,
exited their positions by end-December 2021, filings showed.
    Spokespeople for Marshall Wace and Odey declined to comment.
    After the competition bureau first blocked the deal in
summer 2021, Shaw shares tumbled and the discount to Rogers'
offer price widened to about 19%, underlining the high risk to
the acquisition.
    If the competition bureau had prevailed, analysts had
predicted Shaw shares would have dropped to the pre-bid level of
C$23, pointing to steep losses for the hedge funds.
 ($1 = 1.3350 Canadian dollars)
 (Reporting by Maiya Keidan in Toronto and Nell Mackenzie in
London
Editing by Denny Thomas and Deepa Babington)
 ((Maiya.Keidan@thomsonreuters.com; 44 207 542 1594; Reuters
Messaging: maiya.keidan.thomsonreuters.com@reuters.net))