Canary Wharf may not get good bid
LONDON, England (Reuters) -- Canary Wharf Group Plc said on Tuesday a five-month takeover battle could end without a deal as some investors raised concerns about a 1.5 billion pound ($2.5 billion) bid and the firm rejected a rival offer.
Shares in the British property developer fell 3.0 percent to 233-1/4 pence by 1045 GMT as hopes of a deal faded.
Canary Wharf, which turned derelict London docklands into a Manhattan-style financial district, said it had been willing to back a 255-pence-per-share bid in cash and shares from a consortium led by U.S. investment bank Morgan Stanley.
It said, however, that "certain shareholders,'' whom it did not name, were concerned they might not be able to realise the full value of the equity portion of the deal, which the Morgan group estimates to be worth 35p per share.
"In view of the above, there can be no certainty that a recommended offer will be forthcoming,'' the owner of Britain's tallest building said in a statement.
Canary Wharf said talks with the Morgan group continued but added it had ended contact with Brascan Corp after the Canadian conglomerate made an improved bid approach of less than 255p per share.
Brascan, which owns about nine percent of Canary Wharf, said last week it would not accept the Morgan team's current proposal. The Canadian firm declined to comment on Tuesday.
SELLING AT THE BOTTOM
Canary Wharf opened exclusive talks with the Morgan group last week over an offer of 220p per share in cash and 35p a share in equity in a specially created company, which would trade on London's junior Alternative Investment Market (AIM).
Some analysts and investors were concerned, however, that the shares might turn out to be worth less than 35p. Some institutional investors are also barred from owning shares on AIM because of its less demanding disclosure rules.
"I think shareholders are coming to the view that it's (the Morgan bid) on the low side,'' said Alan Patterson, an analyst at HSBC who thinks Canary Wharf is worth at least 280p per share.
"We're probably towards the bottom of the market in terms of tenant demand... and there's an argument for saying, 'Why should we be selling at the bottom?''' Patterson said, predicting Canary Wharf shares would fall to 200-220p if bid talks collapsed.
A spokeswoman for the Morgan-led consortium declined to comment on whether it would raise or change the terms of its bid. The Morgan group includes U.S. investor Simon Glick, who owns about 14 percent of Canary Wharf.
Sources close to the matter said on Tuesday that Glick's participation in the deal was adding to the uncertainty over a recommended offer.
Brascan, whose businesses span property, financial services, mining and power generation, has appealed against a ruling by the UK's Takeover Panel allowing Glick to participate in the Morgan-led consortium.
The Canadian firm believes the terms Glick is receiving amount to preferential treatment, the sources said.
REICHMANN IN THE WINGS?
Further complicating matters is Canary Wharf Chairman and founder Paul Reichmann, who has also said he might assemble a bidding consortium if offers do not match the 300-310p per share he believes the company is worth.
Reichmann has held preliminary talks with billionaire Saudi Prince Alwaleed bin Talal about a joint takeover bid, sources close to the situation told Reuters on Monday.
The sources added, however, the talks were not substantive, and analysts were sceptical they would lead to a bid.
"It's a bit late in the day,'' said HSBC's Patterson. "If he (Reichmann) was serious about it, he should have done it (assembled a bidding consortium) three months ago.''
Reichmann owns about 7.8 percent of Canary Wharf.
Named after a dockyard that once handled bananas from the Canary Islands, Canary Wharf was originally developed by Reichmann's Olympia & Yorke.
It ran into difficulty after the 1987 stock market crash and fell into the hands of its creditor banks. It was later sold to a consortium of international property investors led by Reichmann, Alwaleed and others.
Recently, the firm has been hit by a downturn in the financial services sector, which includes its major tenants.
Copyright 2003
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
