Independent directors of Canary Wharf, the London Docklands office development, are mulling two bids for the group after CanadaÃÂ´s Brascan tabled a last-minute offer, according to industry sources. 'Yes, Brascan have put in an offer, but I canÃÂ´t get into price,' said an industry source close to the company. Brascan, a property and power giant, owns 9 pct of Canary Wharf.
A consortium including Morgan Stanley and Goldman Sachs submitted an offer for the company on Wednesday, meeting the deadline set by the Canary Wharf board. 'Talks are continuing around two bids and I think we can expect an update tomorrow, hopefully that will be a decision either way,' said another industry source close to the company.
But it is unclear whether the company will recommend either bid because, according to newspaper reports, it is holding out for about 275 pence per share. There were fears in the stock market earlier in the week that no one would come forward to bid. Shares in Canary Wharf were up 8-1/2 pence or 3.74 pct at 236 by 11.20 am. A spokeswoman for Canary Wharf declined to comment.
Analysts estimates of the companyÃÂ´s value have been scaled back since the sale was first muted in June. The London property market is now in its worst shape since Canary Wharf went bust in the early 1990s. Office vacancy rates are high, rents are still falling and there is plenty on offer including developments at Paddington and London Bridge.
When Morgan Stanley, one of the early tenants at Docklands, first revealed its interest in Canary Wharf the share price was below 200 pence amid concern about surplus office space in the capital.
Canary Wharf executive chairman Paul Reichmann, who owns 7.75 pct of the groupÃÂ´s shares, thinks this is the wrong time in the property cycle to sell. He may also represent an obstacle to any potential buyer because he owns warrants that, if exercised, entitle his family trust to another 7 pct stake in the company. Any bidder who wins the boardÃÂ´s recommendation would have to negotiate a separate deal with Reichmann to buy the warrants out.
Canary Wharf owes much to ReichmannÃÂ´s vision who turned the derelict east London area - once strewn with disused cranes and wharfs - into LondonÃÂ´s new financial centre.
Canary Wharf is now home to LondonÃÂ´s tallest building, and tenants include banking heavyweights Credit Suisse First Boston, Citigroup Inc and HSBC.
Reichmann drove the development, as head of property empire Olympia & York, from when the first foundations were laid in 1988. In 1992 economic downturn pushed Olympia into bankruptcy with debts of 8 bln stg but in 1995 Reichmann staged a comeback with the help of financiers, including Saudi pricnce Al Waleed bin Talal, buying back Canary Wharf from developers for 800 mln stg. He took the company public in April 1999 with a 2.2 bln stg flotation. But in early 2003 the property market took a dive.