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As one of Canada’s most bitterly contested acquisitions nears the finish line, a dozen hedge funds including Citadel and Millennium Management are heaving a sigh of relief and sitting on profit of more than $216-million on paper after a nearly two-year roller coaster ride.

Prospects for Rogers Communications Inc’s RCI-B-T $20-billion bid for Shaw Communications Inc SJR-B-T brightened after Canada’s competition bureau this week dropped plans to block the deal. While the Canadian government still has the final say, most analysts and competition lawyers expect the deal to clear the last hurdle and close by the Jan. 31 deadline.

Rogers’ bid faced antitrust risk from the start as the country’s top three telecoms operators account for 80 per cent market share. Still, hedge funds piled into Shaw, betting the deal would go ahead.

Hedge funds that bet on mergers and acquisitions aim to make money by buying shares in a company that is the target of a takeover bid in the hope they will rise towards the offer price.

Publicly available data does not show exactly when the funds moved into the stock – some may have held the stock long before the transaction was announced and stuck with it, granting them an even bigger payday.

The ride over the past two years wasn’t one for the faint-hearted as the competition bureau battled to keep the transaction from going through, taking its case to Canada’s antitrust tribunal and a Federal Court of Appeal.

But now, together, the 12 hedge fund firms have made hundreds of millions over the nearly two-year period between Mar. 15, 2021 – when the deal was announced – and Tuesday, when the competition bureau dropped its attempts to block the merger, according to Reuters’ calculations using Refinitiv Eikon data. The shares have risen 18 per cent since the deal was first announced.

Billionaire Israel Englander’s Millennium, the hedge fund with the largest position in Shaw, would have made a $44-million profit from its 7.59 million shares if it had held the number of shares it currently holds for the full two years, according to Reuters calculations.

A spokesperson for Millennium declined to comment.

Kenneth Griffin’s Citadel and 10 other hedge funds, including Canyon Capital Advisors, Pentwater Capital Management and Britain’s Sand Grove Capital Management, were among the firms that bet on the deal succeeding in spite of many hurdles.

The 12 hedge fund firms together owned 7.05 per cent of Shaw’s shares, or 33.6 million shares, according to Refinitiv Eikon data.

Spokespeople for Citadel and Sand Grove declined to comment while Pentwater and Canyon did not respond to requests for comment.

Investor confidence in Canada’s rule of law means local deals are attractive to many merger arbitrage funds and large multi-strategy funds, said Jim Neumann, chief investment officer of alternatives advisory firm Sussex Partners.

Millennium, for example, is a multi-strategy firm – meaning it operates different hedge fund strategies.

Hedge fund firms are also tracking other deals in Canada, such as Ritchie Bros. Auctioneers’ deal to buy IAA Inc, public filings compiled by Refinitiv Eikon showed.

Sticking with the Rogers-Shaw deal required a great amount of patience and conviction as the companies faced a protracted ordeal to finalize the transaction and some hedge fund firms, like British firms Marshall Wace and Odey Asset Management, exited their positions by end-December 2021, filings showed.

Spokespeople for Marshall Wace and Odey declined to comment.

After the competition bureau first blocked the deal in summer 2021, Shaw shares tumbled and the discount to Rogers’ offer price widened to about 19 per cent, underlining the high risk to the acquisition.

If the competition bureau had prevailed, analysts had predicted Shaw shares would have dropped to the prebid level of $23, pointing to steep losses for the hedge funds.

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