Rogers’ proposed $26 billion takeover of Shaw Communications, if successful, could deliver a $216 million payday to 12 hedge funds that bet on it — reports Reuters.
The controversial and heavily contested merger has a January 31 deadline. With the Federal Court of Appeal rejecting the Competition Bureau’s appeal of the merger on Tuesday, Rogers and Shaw only require Industry, Science and Technology Minister François-Philippe Champagne to approve the sale of Shaw-owned Freedom Mobile to Quebecor’s Vidéotron, a side deal meant to alleviate antitrust concerns over the broader transaction, to merge.
Competition Commissioner Matthew Boswell has no recourse left to block the Rogers-Shaw deal, but it continues to face opposition from independent telecommunications companies like TekSavvy and consumer groups.
Even so, analysts and experts now expect the deal to close by its Tuesday deadline. While Minister Champagne said earlier this week that he “will render a decision in due course,” he all but affirmed his approval of the Freedom-Vidéotron deal last year — provided Quebecor agrees to certain conditions.
Hedge funds that bet on the merger going through and bought heavily into Shaw now stand to collectively make hundreds of millions once the deal closes. These included Millennium Management, Citadel, Canyon Capital Advisors, Pentwater Capital Management, and Britain’s Sand Grove Capital Management, along with seven others.
Hedge funds bet on mergers and acquisitions by purchasing a stake in the subject of a takeover, hoping that the stock’s price will rise toward the offer price of the acquisition. While Reuters was unable to ascertain when the 12 hedge fund firms in question bought their positions in Shaw, they together owned 7.05% of Shaw, or 33.6 million shares.
While mergers can often be risky, the Rogers-Shaw deal took a particularly tumultuous road. The deal was challenged at every corner by regulators, the government, and even the Canadian public over concerns it would increase prices and decrease competition in Canada’s already oligopolistic telecom space.
It ended up being too rich for some hedge funds’ blood, with firms like the U.K.’s Marshall Wace and Odey Asset Management bowing out and closing their positions by December 2021. However, those that stuck it out are now looking at massive returns.
Millennium Management, owned by billionaire Israel Englander, held the largest position in Shaw. According to Reuters‘ calculations (using data from Refinitiv Eikon), Millenium alone would have made a $44 million profit on its 7.59 million Shaw shares over the nearly two-year period between the announcement of the Rogers-Shaw deal in March 2021 and the dismissal of the Competition Bureau’s case against it this week, assuming it had held all of them for the entire period.
Shares in Shaw Communications have climbed 18% since the takeover was first announced.
