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Joint Bid Planned for Canary Wharf

Goldman Sachs and Morgan Stanley plan to offer up to $2.5 billion for the British property firm, sources say.

September 01, 2003|From Reuters

U.S. investment banks Morgan Stanley and Goldman Sachs Group are set to announce a joint bid for indebted British property firm Canary Wharf Group today, sources familiar with the proposal said Sunday.

The sources said the offer, which would be led by the Morgan Stanley Real Estate Fund, was likely to be for as much as $2.5 billion in cash.

Shares of Canary Wharf, owner of Britain's tallest building in east London's Docklands area, have a market value of about $2.4 billion. The company has net debt of $5.4 billion.

The bid is backed by the Glick family, Canary Wharf's biggest shareholder, with a 15% stake, the sources added.

Morgan Stanley and Goldman Sachs declined to comment.

Banking sources said at least three groups had written to Canary Wharf to express an interest in buying the company.

The lineup originally pitted Morgan Stanley's real estate investment fund against rival Goldman Sachs and Canadian conglomerate Brascan Corp., which has close to a 10% stake in Canary Wharf.

Letters of interest had to be submitted to Canary Wharf's bankers late last week, but sources familiar with the bidding said Sunday that Goldman had approached Morgan Stanley about a joint proposal.

Those sources said they believed Brascan still was in contention for Canary Wharf. In addition, Paul Reichmann, the chairman and founder of Canary Wharf, who controls about 8% of the firm's share capital, has said he could be a potential bidder.

Canary Wharf, which turned derelict docklands into a new financial district on the river Thames in east London, has suffered along with its rivals as the global economic slowdown hit.

But it owns real estate that its rivals covet, and its tenants include banking heavyweights Citigroup Inc. and HSBC.

The banking sources said Friday that they expected the company's bankers to sift through letters of interest and give the parties a deadline for offers.

Canary Wharf was originally developed by Reichmann's Olympia & York. It ran into difficulty after the 1987 stock market crash and had to be bailed out by a group of banks. It then was sold to a consortium of international property investors led by Reichmann.

The company recovered to lure blue-chip tenants away from London's traditional finance district, known as the City, to the complex's new skyscrapers to the east.

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