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Blackstone ups its bid for Equity

SHARE Blackstone ups its bid for Equity

CHICAGO — Private equity firm Blackstone Group raised its cash takeover bid for Equity Office Properties Trust to $23 billion on Tuesday, escalating a down-to-the-wire bidding war for the real estate company.

Equity Office told shareholders to vote for the deal at a special meeting this morning, even though it was still less than a $23.2 billion bid from rival suitor Vornado Realty Trust.

Blackstone's newest bid is for $55.50 per share, up nearly 15 percent from its first offer in November. Tuesday's sweetened offer was a nearly 3 percent increase from Blackstone's last bid of $54 a share, or $22.3 billion. But it still fell short of the $56-a-share cash-and-stock proposal from Vornado.

Including assumed debt, Blackstone said its latest offer is valued at $39 billion.

A Blackstone spokeswoman declined further comment.

The private equity firm's latest offer came two days after Vornado announced a proposal to pay the cash portion of its bid upfront to address concerns about the speed and certainty of its offer.

The Equity Office board said the net present value of Vornado's $56-per-share bid is in the range of $54.81 to $55.07 per share, even after taking into account the receipt of dividends. Equity Office continued to say Tuesday that it thinks the Vornado offer is too risky to accept.

But analysts said Vornado might raise its bid again, hoping to change the minds of shareholders in the final hours before they cast their ballots.

"It might not be over," said Tom Burnett, director of research at Wall Street Access.

Investors seemed to agree, sending shares of Equity Office to levels above Blackstone's latest bid.

Sri Nagarajan, an analyst at RBC Capital Markets Corp., said Vornado must increase its bid to at least $59.50 per share to woo shareholders.

"Given the industry expectations of continued liquidity for ... office real estate assets, an increased disposition strategy may still be profitable, while risky," Nagarajan wrote in a research note. "Therefore, it may be tempting for VNO to increase the offer."

A spokesman for Vornado, based in Paramus, N.J., did not return messages Tuesday.

Equity Office is the nation's largest publicly traded office landlord and owns more than 580 buildings totaling more than 105 million square feet nationwide.

If Equity Office rebuffs Blackstone, it would have to pay the New York company a $720 million termination fee — up from a $500 million breakup fee that was part of its earlier offer.

If shareholders approve the Blackstone bid, the deal could close on Friday.

Bidding for Equity Office began in November when Blackstone agreed to buy the real estate company for $20 billion, or $48.50 per share.

Vornado, which joined Starwood Capital Group and Walton Street Capital LLC, countered with a $52-per-share cash-and-stock offer valued at $20.4 billion, and Blackstone fought back with its $54-per-share bid.

Last week, Vornado boosted its cash-and-stock offer to $56 per share before offering an up-front tender offer to buy up to 55 percent of Equity Office's shares for $56 in cash, then complete a follow-on merger.

That tender offer would begin about three weeks after Equity Office signed a final agreement and would close 20 business days later. The acquisition would close about 3 1/2 months after signing.

"I suspect ego has now gotten into the bidding process and both sides want to win," said John Vogel, a real estate professor at Dartmouth's Tuck School of Business. "I think it's pretty clear that nobody is getting a bargain and the question is whether they're paying a premium."