Senrigan Capital Group Ltd., an Asia-focused event-driven fund backed by Blackstone Group LP, lost 13 percent last month after the collapse of Sichuan Hanlong Group’s bid to take over Australia’s Sundance Resources Ltd., according to a person with knowledge of the matter.
The termination of one of the $361 million Senrigan Master Fund’s key merger arbitrage investments alone led to a 12 percent decline in net asset value in March, the Hong Kong-based manager said in a letter to investors seen by Bloomberg News, without identifying the deal. It added that it was the largest contributor to the month’s negative performance.
The fund’s loss highlights the risks of running event-driven hedge funds that make large bets on corporate mergers in a region with often opaque private businesses. The Eurekahedge Asia Event-Driven Hedge Fund Index, tracking the performances of 12 such funds, returned 10 percent in the first three months, according to preliminary data from the Singapore-based provider.
Suzi-Kay Jacoel, investor relations officer at Senrigan, and Peter Rose, a New York-based spokesman for Blackstone, declined to comment. Assets of Senrigan, led by Chief Investment Officer Nick Taylor, have declined since topping $1 billion in April 2011. Taylor was head of Citadel LLC’s principal investments business in Asia and Europe.
The deal broke “after the unanticipated arrest of the chairman and founder of the acquiring company for harboring a fugitive murderer,” according to Senrigan’s newsletter.
Liu Han, the billionaire chairman of closely held Hanlong, was unexpectedly detained with his wife in China in March, China’s Shanghai Securities News said March 20, citing unidentified people. Sundance said March 21 it hadn’t been able to reach Liu and the official Xinhua News Agency reported March 22 that a man with the same name is under investigation for sheltering a murder suspect. He is being held by the police for helping his brother evade capture over a 2009 triple murder, state media later reported.
Sundance’s shares plunged a record 48 percent in Sydney on April 9 after it scrapped the A$1.14 billion ($1.2 billion) deal with closely held Hanlong as the latter was unable to secure funding for the acquisition. Hanlong owns 14 percent of Sundance, according to data compiled by Bloomberg.
The Chengdu, China-based company was trying to buy the rest of Sundance to control the Mbalam iron ore project straddling the Republic of Congo and Cameroon. Perth-based Sundance needs an investment of $4.7 billion for the project. It is in talks with other Chinese and non-Chinese parties, it said in a statement April 8 without identifying them.
Senrigan started to buy Sundance shares in 2011 and it was once one of its largest investments, said the person, who declined to be identified as the information is private. It plans to put the investment in a separate pool, known in the industry as a side-pocket.
Senrigan has the support of its largest investors to hold onto the investment for the moment, on anticipation that a Chinese company will step forward to rescue Sundance because of the country’s thirst for resources, the person said.
The Senrigan fund gained 12 percent since September without the Sundance investment and 5.5 percent this year excluding losses related to it, the person said.