BUZZ-Hammerson-Intu: arb traders expect Intu strength after Klepierre disrupts deal

** Arb traders see continued strength in Intu Properties (LSE: INTU.L - news) despite disruption in its planned merger with Hammerson (Frankfurt: 876140 - news)

** French shopping centre operator Klepierre (EUREX: CL6.EX - news) offers 4.9 billion pounds for Hammerson, putting the Hammerson-Intu (Swiss: OXIGTU.SW - news) tie-up at risk of collapse

** Hammerson rejects Klepierre (LSE: 0F4I.L - news) 's offer but its shares rise more than 24 percent, suggesting an improved offer or a counter-bid (Intu posts more modest gains of 3 pct)

** Merger-arb funds traditionally short the acquiring company (Hammerson) while going long the company being acquired (Intu), as their share prices converge as completion nears

** Merger-arb trader at a major broker says Hammerson share price likely also being helped by some of these positions being unwound - shorting Hammerson outright could return c.4 pct from current levels as short-covering pressure relents

** Three funds - Marshall Wace, Carlson Capital and Magnetar Financial - currently have significant short positions in Hammerson disclosed with the regulator, up from zero in December

** Trader adds a better position would be to go long Intu with a smaller short in Hammerson

** Strength in Hammerson share price means those who were not involved previously may see current spread levels as worthy of getting long Intu with a light Hammerson hedge

** This position hedges against the Hammerson-Intu deal completing, while Intu will likely be a target for a rival if the deal collapses