Paul Reichmann, chairman and founder of Canary Wharf, is in negotiations with a Morgan Stanley-led consortium over joining its bid for the development, if he can agree a deal on his near ÃÂ£100m-worth of warrants.
Mr Reichmann wants his package of warrants, granted at the time of Canary Wharf´s stock market listing in 1999, bought out by the Morgan Stanley Real Estate Fund (Mesref) which is bidding jointly with Goldman Sachs´s Whitehall Fund. Simon Glick, the diamond magnate who owns 9 per cent of Canary Wharf, is also joining the consortium, although he has retained the right to bail out. It is not clear whether Mr Glick intends to sell his stake.
Mesref and Goldman have signed an agreement not to bid without the recommendation of the independent non-executive directors of Canary Wharf.
It is understood that Mesref had already opened bilateral talks in June with Mr Reichmann over a joint bid. Those discussions broke down because of a disagreement over the valuation of his warrants, but they have resumed now that Mesref´s consortium has new partners.
Mr Reichmann´s warrants entitle him to raise his shareholding by 4 per cent from 7.7 per cent now. They are held through IPC Advisers, a company controlled by Mr Reichmann, and have a strike price of 375p, while others have a strike price of 450p.
Shares in Canary Wharf will have to enjoy compound growth rates of 15 per cent for three years from a starting point of 400p before the warrants can be exercised. Mr Reichmann is believed to value the warrants at more than ÃÂ£100m while Mesref believes that the recent weakness in the London property market means they are now worth less than ÃÂ£100m.
Until Mr Reichmann is committed to Mesref, it is still possible for him to team up with Brascan, the Canadian property developer, which also submitted a bid last week.
The allegiance of other Canary Wharf founding shareholders remains unclear. They include Laurence Tisch of the Lowes hotel chain and Saudi Prince al-Waleed Bin Talal.
Tense negotiations over the summer also focused on the role Mr Reichmann would play in Canary Wharf once it has been taken private.
Mr Reichmann, whose vision for Canary Wharf has driven the company for nearly two decades, was understood to be reluctant to cede direct control to bidders.
'Mr Reichmann has invested a lot in this company financially and emotionally,' said one person close to the deal. 'This is a very difficult time for him.'
Source: The Financial Times