Paulson & Co, the New York-based hedge fund manager that quadrupled its assets to USD30bn last year by betting on the collapse of the US sub-prime mortgage market, has bought 50 millio
Paulson & Co, the New York-based hedge fund manager that quadrupled its assets to USD30bn last year by betting on the collapse of the US sub-prime mortgage market, has bought 50 million Yahoo! shares during the first quarter.
Paulson has thrown its weight behind the plans of investor Carl Icahn to challenge the Yahoo! board by putting forward an alternative slate of directors at the company’s upcoming annual shareholders’ meeting. Last Thursday, Icahn launched a proxy battle to force Yahoo! to reopen talks with Microsoft, saying the board had acted ‘irrationally’ in refusing the software giant’s USD47.5bn acquisition bid.
When a hedge fund manager joins a battle like this, it is usually for a better return. So while Paulson has said it hopes a proxy fight won’t be necessary to get Yahoo! and Microsoft back to the bargaining table, clearly it will do what it takes to generate a return on its investment.
Paulson, which is managed by merger arbitrage specialist John Paulson, disclosed in a regulatory filing it had built up a stake of about 3.4 per cent of Yahoo! with a value of USD1.44bn. Icahn holds 59 million shares, or 4.3 per cent of the company.
Hedge funds tend to pursue returns more aggressively than other institutional shareholders and are also more likely to vocally press for tactical moves that could buoy target companies’ share price. Yahoo! shareholders stand to gain by Paulson’s intervention, and it seems now a matter of when rather than if the Microsoft deal gets back on track.
