Hedge funds cave in on fight over £4.6bn bid for satellite giant Inmarsat

Hedge funds threatening to derail the £4.6 billion takeover of UK satellites giant Inmarsat staged a dramatic U-turn on Tuesday, cancelling a High Court bid to wring more money from the buyers.

Rebel investors pulled their legal action over fears it would kibosh the deal.

A handful of shareholders, led by $120 billion US firm Oaktree, have been embroiled in a spat with Inmarsat’s private equity buyers Warburg Pincus and Apax over claims the $7.21 offer for the satellite firm is too low.

Oaktree, founded by billionaire Howard Marks, hired lawyers from Herbert Smith Freehills for a court showdown.

It planned to argue for a second shareholder vote on the takeover in light of the claims that the deal failed to take into account a lucrative satellite spectrum contract co-owned by Inmarsat in the US.

But Oaktree caved in on the demands today after Inmarsat’s buyers yesterday vowed to kill off the deal if a High Court judge sided with Oaktree.

The threat from the bidders appears to have forced the change of heart from Oaktree. Last night it wrote to the other side rolling back on its attempt to increase the price, clearing the way for the judge to rubber-stamp the takeover.

Court hearings to approve takeovers are known as a scheme of arrangement.

“Having considered our position carefully, we now no longer intend to raise objections to the Scheme being sanctioned at the hearing,” Oaktree said.

The firm added it was “a matter of regret” that Inmarsat’s buyers had refused to discuss reopening the deal to increase the offer.

Oaktree’s objection had set up a high- stakes game of chicken pitting two of the Square Mile’s most aggressive tribes, private equity firms and hedge fund investors, against one another.

A source close to the deal said Oaktree, which was supported by fellow hedge funds Kite Lake and Rubric, had “blinked first” in the game.

If a judge had sided with Oaktree and delayed the deal, it would have established a new precedent for shareholders to contest disputed deals.

About 80% of shareholders approved the deal at a vote in May although it faced objections from Norges, Jupiter and Standard Life Aberdeen.

Oaktree’s intention was to delay the deal to see whether US regulators would approve use of Inmarsat’s spectrum. The hearing had been planned for November 12. The deal is now expected to be rubber-stamped this week.