THREE secretive US hedge funds last night emerged as the key backers of American sports tycoon Malcolm Glazer’s controversial £800m takeover of Manchester United.
The New York-based funds of Citadel, Och-Ziff Capital Management and Perry Capital have poured £275m into the bid.
… The three hedge funds have combined to acquire special-preference shares issued as part of the Glazer takeover. Glazer will pay the funds interest and retain the option of buying back the shares at a later date.
A further £265m loan facility has been provided by JP Morgan and is being syndicated to a consortium of banks, with the remaining £272m provided through the Glazer family’s existing equity stake.
This type of investment seems to be a bit of a departure from leveraged investments and hedges that one might expect from hedge funds. But these funds are not typical hedge funds.
Kenneth Griffin, the youthful founder of Citadel, is one of the most respected money managers in America… The fund now manages more than $12 billion and accounts for more than 1% of daily trading in New York, London and Tokyo.
Perry, founded and run by Richard Perry, manages about $11 billion in assets. The fund is known for its bruising approach in takeover battles, and has built stakes in firms including Blockbuster, the video-rental chain.
Och-Ziff is one of the world’s 20 largest hedge funds with an estimated $12 billion of assets under management…. Founder Dan Och, who spent 12 years at Goldman Sachs, started the fund in 1994 with $100m of capital from the Ziff brothers of the legendary American publishing family.
In light of the information provided in the comments section to Skip’s inital posting about this takeover, the investments by these funds could well turn out to be quite lucrative. There could be potentially large capital gains from this investment. But the major upside will go to Glazer, who has a buy-out option if the acquisition turns out to be profitable, and the hedge funds will share in the down-side risk if it doesn’t.
I presume they are being well-compensated for taking this risk.