The Morning Brief: Delaware Says Energy Transfer Can End Williams Merger

June 27, 2016   Stephen Taub


A Delaware judge ruled that Energy Transfer Equity can terminate its proposed acquisition of pipeline rival Williams Companies, according to published reports. Unless there is a compromise deal, the $38 billion merger for cash and stock agreed upon in September 2015 won’t take place. Ultimately, the merger is falling apart because the judge agreed that Energy Transfer was unable to get a determination from its law firm, Latham & Watkins, that the transaction would be tax free, a key provision of the original deal. The merger period officially ends on June 28. Shares of Energy Transfer, which fell 3.6 percent on Friday amid the global selloff in stocks, rose about 7.6 percent in after-hours trading. Williams’ stock fell more than 2 percent on Friday during the regular trading session and nearly 7 percent in after-hours trading.

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The hedge fund industry continues to grow more institutionalized. According to a new report from London-based Preqin, there are now 238 institutional investors that have $1 billion or more in hedge funds, a net increase of 11 since May 2015. Altogether, this so-called billion-dollar club has invested $763 billion in hedge funds, up 4 percent from May 2015, the last time Preqin reported on this data. Public pension funds accounted for 27 percent of this group, the largest of any subgroup. Private-sector pension funds accounted for 16 percent. Altogether, slightly less than half of the investors with more than $1 billion in hedge fund investments use funds of hedge funds as part of their strategy. The average billion-dollar club investor is invested in 33 hedge funds, compared with just eight funds among smaller investors. The mean allocation among this small group of big investors rose from 15.9 percent of total assets to 16.8 percent. The mean allocation of all other investors rose from 14.3 percent to 14.8 percent.

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Steven Cohen is apparently laying the groundwork for staging a comeback in the hedge fund industry. According to The Wall Street Journal, Perry Boyle, who oversees stock and macro investments at Point72 Asset Management, which manages Cohen’s family money, is leaving to head up Stamford Harbor Capital, a new hedge fund firm created by Cohen. This is the vehicle he is expected to use to revive his hedge fund career and raise money from outside investors. Stamford Harbor is located across the street from Point72 in Stamford. Under a civil settlement with the Securities and Exchange Commission, Cohen can own a hedge fund again in a year and a half. However, he can’t manage the firm until January 1, 2018. In 2013 his firm, SAC Capital Advisors pled guilty to criminal insider trading charges.

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Credit Suisse raised its price target on hedge fund favorite Transdigm Group from $270 to $295 following the company’s investor-day meeting. The investment bank was impressed that management at the maker of commercial and military aerospace components expects value-creation to continue, noting its new target reflects "expected deployment of the excess capital." We noted earlier that at the end of the first quarter, 19 hedge fund firms included the stock among their top-ten holdings. In addition, ten of 49 Tiger-related hedge fund firms held positions in the stock, including Greenwich, Connecticut-based Lone Pine Capital, Greenwich, Connecticut-based Viking Global Investors and New York-based Blue Ridge Capital. Shares of Transdigm fell nearly 3 percent on Friday, to close at $257.65.


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