15/02/2012 Author: Will Wainewright (London)

Exclusive: Event-driven funds bet on GlobeOp takeover

Event-driven hedge fund managers, including $7bn firm Cheyne Capital, have been buying GlobeOp shares in recent weeks as speculation continues over whether a higher acquisition bid will come in for the administrator.

Private equity firm TPG Capital remains the frontrunner in the absence of a bid to rival its $800bn offer, but GlobeOp analysts have described the bid as low, while fellow admin firm SS&C has voiced its interest publicly.

In a clear sign that speculators believe a higher bid is likely, shares have been changing hands for around 460p this week, well above TPG’s 435p-a-share offer level.

Asset manager Cheyne Capital, which runs $4.6bn across a hedge fund range which includes a $400m event-driven fund, built its stake up to almost 2% on Friday, while Sandell Asset Management and First Eagle Investment Management have also been building up stakes.

Speaking on condition of anonymity, a portfolio manager at one event-driven fund, not one of the above, which has built its GlobeOp stake up to close to 1% in recent days, told HFMWeek that a rival bid was not guaranteed but the trade made sense on a “risk/reward basis”.

“It would be a very good acquisition for SS&C, or anyone, but I am not convinced they are going to make a bid. They are backed by the Carlyle Group (the American private equity firm), but it would be much bigger than their previous biggest takeover,” he said.

That was in 2005 when SS&C acquired systems provider Financial Models for $160m. However, figures released to HFMWeek reveal that on a revenue comparison basis a takeover by SS&C would be comparable.

Financial Model’s revenues stood at $60m compared to SS&C's $95m, approximately 63%, whereas GlobeOp’s $221m revenues currently stands at 59% as a proportion of SS&C’s $370m.

However, it would be a big ask from a financial point of view given SS&C’s net debt balance of $96.5m, despite a far superior market cap of $1.46bn.

GlobeOp's share price stood at 455p as of this morning.

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