The agreed acquisition of Telent, the rump of Marconi, the telecoms equipment company, fell apart on Friday after the hedge fund that is the company’s biggest shareholder voted it down.
Polygon, the activist hedge fund that holds 23.9 per cent of Telent’s equity, angered Telent’s management, other shareholders and Fortress Investment Group, the US private equity firm, which had offered to pay £346m for the telecoms services company.
”This deal’s dead. There’s no other deal to replace it,” said John Devaney, chairman of Telent.
The wrangle in the run-up to the vote raised questions over the use of derivatives during takeovers, the utility of the Takeover Code and the nascent secondary market for mature occupational pension funds.
The extraordinary meeting on Friday held the prospect of high drama. Polygon had already cast its proxy vote against the takeover on Wednesday night but could have reversed its decision if the hedge fund’s managers had turned up in person to vote in favour.
In the event, no last-minute intervention was forthcoming and the deal - which needed 75 per cent of shareholders voting to support it because of the scheme of arrangement under which it was structured - fell apart.
The wrangle between Polygon on one side and Fortress, Telent and other shareholder on the other had lasted some weeks, with the hedge fund’s tactics under scrutiny.
At one stage, Polygon had an economic interest of only 10 per cent in Telent, in spite of voting rights of 23.9 per cent, owing to the contracts-for-difference it used to hedge its position.
Polygon was accused of trying to muscle in on the deal as it hoped to launch a joint bid with Fortress. The parties took advice from the Takeover Panel, which is understood to have advised that Polygon would not have been allowed to join Fortress at such a late stage.
But even with Fortress refusing to pay more, and the option of a joint bid ruled out, Polygon maintained its opposition to the 529½p offer.
The hedge fund, which had a substantial shareholding even before Fortress’s offer, is understood to believe 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.
Shares in Telent rose 8p to 492p on Friday morning, still well below the level of Fortress’s offer.