Hedge funds up Wellstream stakes; Schroders sells

Fri Oct 15, 2010 11:02am EDT

* Seven hedge funds now hold more than 14 percent of stock

* Wellstream rebuffed $1.2 bln GE approach last week

* Biggest traditional investor, Schroders, has been selling

* Credit Suisse-linked York Capital among arbitrageur owners

By Quentin Webb

LONDON, Oct 15 (Reuters) - Hedge funds have raised their stakes in Wellstream Holdings Plc WSML.L, regulatory filings show, suggesting they anticipate an improved approach for the oil-pipes company that recently rebuffed General Electric (GE.N).

But their optimism appears at odds with Wellstream's largest investor, Schroders Plc (SDR.L), which has sold two-fifths of its stake, an example of so-called "top-slicing" where traditional investors trim holdings during a takeover tussle to lock in gains.

Late in September, Wellstream admitted receiving bid approaches. Last week GE, the largest U.S. conglomerate, revealed Wellstream had rejected an approach at 750 pence a share, or 755 million pounds ($1.2 billion).

GE said it was "disciplined" about deals and it might not make another approach or could do so "on less favourable terms". [ID:nLDE69506K]

Analysts and newspaper reports have said rivals National Oilwell Varco Inc (NOV.N) and Saipem SpA (SPMI.MI) could also bid for the British maker of flexible pipes for oil companies.

Seven funds have disclosed stakes amounting to about 14.1 percent of Newcastle-based Wellstream, with four increasing their holdings this week.

Since Sept. 22 Schroders has cut its holding to 8.06 percent from 13.5 percent, selling at between 756 and 791 pence a share.

The biggest hedge fund stakes are the 5.2 percent held by Patrick Schegg's Tell Capital, and 2.6 percent held by Westchester Capital Management, whose merger-arbitrage mutual fund, the Merger Fund (MERFX.O), has run since 1989.

Jamie Dinan's $14 billion York Capital Management, in which Credit Suisse (CSGN.VX) recently took a minority stake, has almost 2 percent.

New York-based TIG Advisors and Sonterra Capital, New Jersey's Alpine Associates Advisors, and Paris- and London-based Boussard & Gavaudan hold about 1 percent each. Other firms may hold sub-1 percent stakes they do not need to disclose.

Wellstream shares, which closed at 780 pence the day before GE's statement, were at 757 pence at 1347 GMT.

The role of hedge funds in mergers has come under scrutiny in Britain after Kraft Food Inc's KFT.N takeover of Cadbury.

Former Cadbury Chairman Roger Carr has said having a big base of hedge-fund shareholders made it harder to resist a takeover, and has suggested disenfranchising arbitrageurs and other "short-term" investors who buy stakes during a bid battle.

More recently, funds helped Korea National Oil Corp [KOILC.UL] win British oil explorer Dana Petroleum Plc DNX.L, despite Chief Executive Tom Cross's resistance to a deal. (Editing by David Cowell) ($1=.6239 Pound) ($1=.7095 Euro)

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