Eton Park Escapes AbbVie-Shire Carnage

Oct 20 2014 | 1:57pm ET

A number of prominent hedge funds took a beating when pharmaceutical company AbbVie abandoned a $54 billion takeover of Ireland’s Shire—but Eton Park Capital Management wasn’t one of them.

The proposed merger’s raison d’etre fell apart last month when the U.S. Treasury Department announced new rules limiting so-called “tax inversions,” in which a U.S. company buys a foreign concern to reincorporate abroad, thus limiting its American tax bill. AbbVie’s deal with Shire was such a move.

Hedge funds including Paulson & Co., Elliott Management, Magnetar Capital and Taconic Capital Advisors were all betting on the deal’s approval—and suffered big losses when Shire shares plummeted 30% on AbbVie’s decision last week. But Eton Park sold its stake in Shire last month, deciding there was too much risk in the deal, it told clients.

New York-based Eton Park was spooked by Treasury Secretary Jacob Lew’s pledge to curb tax inversions. The firm had already seen profits from its investment, and said Shire was its fourth-best-performing holding in September.

The largest 10 hedge-fund holders had a whopping $9 billion invested in Shire before the deal’s collapse. Few if any were betting against it, and none in a big way: The U.K. Financial Conduct Authority said no fund had a short position in excess of 0.5% of Shire shares.


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