Highfields Capital Management is in no rush to sell its MEG Energy Corp. stake, instead betting that a bidding war for the Calgary-based oilsands company could erupt amid a C$6.3 billion ($4.9 billion) hostile takeover attempt by Husky Energy Inc.
The Boston-based investment firm’s chief executive officer, Jon Jacobson, made the surprise announcement Wednesday that his $12.1 billion hedge fund will wind down and begin returning clients’ money by the end of the year, joining other star managers who have exited the business.
Highfields is MEG Energy’s second-largest investor, owning almost 10 percent of its outstanding stock. Highfields managing director Daniel Farb sat on MEG Energy’s board until July, when he resigned saying he was concerned about the company’s direction.
Jacobson pointed to the MEG Energy investment as an example of why he won’t be conducting a rapid sell-off of Highfields’ holdings.
A combination with Husky makes strategic sense and it’s possible a bidding war will ensue with several other parties entering the mix, Jacobson said in a letter to investors dated Oct. 3. “We think there is a lot of value in MEG, and we will continue to evaluate our options,” he said.
“There is tremendous value in our remaining portfolio, and as such, a rapid wholesale liquidation would be imprudent,” Jacobson said. “The plan is to wind down the portfolio methodically and opportunistically so as to avoid having to sell certain securities at fire sale prices in order to meet some hasty, near-term deadline.”
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