LONDON (HedgeWorld.com)–A fierce battle has broken out among several hedge funds on both sides of the Atlantic concerning the future of Telent, the rump of the one-time Marconi telecoms equipment giant that crashed in the dot.com bust.

At issue is Polygon’s attempt to join an agreed ?? 1/2 346 million sale of Telent to Fortress, the U.S. buyout group. Polygon, the New York-based hedge fund, is thought to have sought a piece of the Fortress Investment Group bid but was rebuffed. Now it is seeking to use its 23.9% holding in Telent to try and block the required 75% vote needed for the deal to go through.

What is stirring up controversy is that Polygon has a 13.8% short position, giving it a net long position of only 10%. This has angered institutional investors and some hedge funds who want the 529.5p bid for Telent to go through.

An extraordinary meeting of shareholders June 21 (Friday) voted in favor of adjourning the shareholder vote to sanction the deal until August 4. Of 61.5 million shares, 25 million voted for the adjournment and 14 million voted against–the Polygon block being opposed.

“The board believes the institutions who lent stock to Polygon should review the arrangement,” a spokesman for Telent told HedgeWorld. “The board believes the proposal on the table from Fortress is the best for all parties.”

Market watchers say the outcome, for now, is too close to call, though it is expected that some of the borrowed shares are likely to be withdrawn and revert to institutions who will support the proposed transaction. Polygon, of course, could buy stock in the market and use that to assemble a blocking stake.

For the moment, the battle looks likely to continue. Telent, meanwhile, closed down 6p at 504p, making funds shorting the stock–such as GLG Partners–the short-term winners.

BMcIntosh@HedgeWorld.com

Contact Bob Keane with questions or comments at bkeane@investmentadvisor.com.