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Hedge fund investors share spoils from Dana Petroleum takeover

It is estimated that hedge fund investors will today be sharing out an estimated £80 million profit, after the £1.7 billion takeover of oil group Dana Petroleum. It is believed that arbitrage investors, i.e. hedge fund investors, committed around £450 million to buy shares in the company after the announcement the group was in takeover talks. In what is becoming something of a self fulfilling prophecy, those holding the 30% of stock owned by the hedge fund investors will vote in favour of the takeover thereby essentially ensuring that the deal goes through.

This proposed deal has been ongoing for some time now and there was concern that the two parties would be unable to agree terms which were acceptable to both. However, whether we like it or not there is no doubt that hedge fund investors and short-term investors are certainly holding the sway with regards to this particular takeover. Hedge funds work on relatively short-term investments which offer a degree of risk which is reflected in the potential return against the potential risk.

While the 30% shareholding held by hedge fund managers in this particular takeover saga is higher than normal, there were significant risks with the potential for the deal to fall through.

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