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Alternative Market Briefing

Hedge funds looking to profit from Power Assets, CKI merger

Wednesday, September 30, 2015

Komfie Manalo, Opalesque Asia:

Hedge funds are looking to profit from the proposed buyout of Hong Kong's Power Assets Holdings by Li Ka-shing’s Cheung Kong Infrastructure Holdings (CKI) and hoped the latter will sweeten their $11.6 billion bid, reports Reuters.

However, their hope may be doused with cold water as U.S. money manager Capital Group, the biggest independent shareholder at both Power Assets and CKI, may not support a higher bid because that would be against its interest. Capital Group owns 7.2% of Power Assets and has an 8% stake in CKI.

CKI is trying to buy the 61% of Power Assets it does not already own, and offered a $2.5 billion special dividend if the deal pushes through. Shareholders will vote sometime in the future; some, Reuters says, believe the offer is not attractive and may ask for more.

CKI and Power assets announced on Sept. 8 a proposal for a stock-for-stock merger. Under the deal, all the Power Assets shares held by shareholders other than CKI's subsidiaries will be cancelled, in exchange for newly issued CKI shares.

Short positions in CKI shares surged after the deal was announced, suggesting investors are expecting the firm to pay to sweeten the deal.

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