This content is from: Portfolio

The Morning Brief: CQS’s Hintze Says Cheap Oil May Come at a Cost

Count Michael Hintze among those who think that falling oil prices are not an altogether good thing. In a December market commentary, the founder, chief executive and senior investment officer of the $14.1 billion, London-based multistrategy hedge fund firm CQS tells clients that while the 40 percent decline in the price of oil over the last six months should support global gross domestic product growth “in the medium-term,” he worries that the big oil price drop also reflects weakening demand globally and will eventually add to deflationary pressure. This could especially hurt indebted countries over the long haul. Hintze also said that he expects U.S. Federal Reserve to maintain its accommodative policy and be “behind the curve” when it comes to hiking interest rates, despite ending its quantitative easing program this year. He says also that the U.S. dollar will continue to strengthen against most major currencies.

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Another day, another win for an activist hedge fund. And another Canadian pension fund is involved in the deal. This time network equipment maker Riverbed Technology announced that it has agreed to be acquired by private equity firm Thoma Bravo, and Teachers’ Private Capital, the private investor department of the Ontario Teachers’ Pension Plan, for $21 per share in cash, or $3.6 billion.

On Sunday, PetSmart agreed to be acquired by a group led by European private equity firm BC Partners for $83 per share in cash, less than five months after New York activist hedge fund firm Jana Partners called on the company to seek a buyer. One of the other members of the buying group includes La Caisse de dépôt et placement du Québec, which manages public pension plans in Quebec.

In the Riverbed deal, in January, Paul Singer’s Elliott Management Corp. offered to buy the company for $19 per share in cash. In February Riverbed rejected Elliott’s higher price of $21 per share. In July New York-based Elliott raised its stake in Riverbed to 6.1 percent. At the end of the third quarter its stake was 9.65 percent.

The third largest shareholder is Eric Mindich’s New York-based Eton Park Capital Management, with 5.8 percent of the stock. Shares of Riverbed rose over 8 percent on Monday, to close at $20.31.

Not all shareholders are happy with the Riverbed deal, however. As often occurs after a deal is announced, a shareholder rights law firm has filed a lawsuit. In this case, New York-based law firm Tripp Levy said it is investigating the deal, explaining that it is concerned about “possible breaches of fiduciary duty” and other violations by the board of directors and senior management over the auction process and whether Thoma Bravo is underpaying for Riverbed.

“The investigation further concerns whether the senior management of Riverbed may have acted in their own self-interests in selling the company to Thoma Bravo,” the law firm states, citing, for example the fact that Riverbed CEO Jerry Kennelly will remain with the company in the same capacity.

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Meanwhile, Jana Partners said it no longer plans to nominate directors to PetSmart’s board of directors now that the company has agreed to be acquired. On Monday, investment bank UBS raised its price target on PetSmart to $83 from $77 following the pet supply retailer’s agreement to be acquired by a group of investors for $83 per share. Good advice. “We think it’s a full and fair price and there are unlikely to be other bidders,” the bank tells clients in a note.

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