Hedge Fund Blocks Telent Offer

HedgeCo.Net (New York) – The US activist hedge fund Polygon threatened to block a takeover of Telent, the rump of former industrial giant Marconi. The battle between Polygon and Fortress highlights the issues with using CFDs in bid situations. CFDs allow investors to vote shares, even though they do not physically own the stock.

Telent had agreed to a £346m takeover by Fortress Investment Group, but postponed a meeting with shareholders last month after Polygon said it would vote against the deal. Telent has not convinced Polygon to support the merger or dilute its 24% stake.

Although Polygon owns just 10% of Telent, it has a short position of 13.8% in the company. Polygon said this week that it intended to vote the entire 23.8% stake against the deal.

The hedge fund believes that the takeover is being done on the cheap, as shares in Telent rose 8p to 492p on Friday morning, The hedge fund believes Telent’s prospects are much better than are being offered by Fortress.

The hedge fund had a substantial shareholding even before Fortress’s offer, and is working on the assumption that there is more value in the business over the long term. It has looked at ways to unlock the £390m held in escrow to secure Telent’s £3bn pension fund, a legacy of the days when Marconi was an industrial giant.