Equity Office Properties (NYSE:EOP) shares moved down $0.54, or $0.97%, to $55.01 today after the company revealed another rival bid from Vornado Realty Trust (NYSE:VNO). The new bid comes in at $56 per share (55% cash and 45% stock), which is higher than Blackstone's standing $54 bid for the company. However given Blackstone's $500 million termination fee and all-cash offer, many investors are skeptical as to whether Vornado's bid is large enough to put Blackstone's in jeopardy. Rather, many believe that Vornado is simply trying to delay Monday's vote on the deal in order to buy more time for negotiations.
What does Vornado's bid look like? Well, according to the company's
8-K filing with the SEC, Vornado proposed to acquire Equity Office for $56 per common share, payable (i) $31 in cash and (ii) in Vornado common shares having a value (based on an average price during a period prior to the closing specified in the transaction documents) equal to $25, except that the fraction of a Vornado common share that would be issued per Equity Office common share would not be less than .1852 nor more than .2174. The proposal also states that this collar assures that the overall value of the Vornado proposal would remain $56 per Equity Office common share so long as the Vornado common share price remains between $115 per share and $135 per share, as compared to Vornado’s closing price of $122.35 on January 31, 2007.
After the offer was made public, Blackstone called the true value of Vornado's bid into question and stated that they had no intention of increasing their all-cash bid. "The true value of Vornado's offer
should reflect a discount for stock, the 3-4 month time delay before
receiving it and the risk of Vornado's share price declining below $115
per share," Blackstone said. "When combined with the risk to Equity
Office shareholders that Vornado shareholders could vote the deal down
for any reason in 3-4 months, we strongly believe that our binding
agreement with Equity Office is clearly superior and we are proceeding
with a Feb. 8 closing, following the Feb. 5 Equity Office shareholders
meeting."
Overall, this is certainly an unprecedented bidding war between private equity that is definitely
worth following. It is likely that EOP will continue to hold their vote on Monday and approve Blackstone's offer; however, nothing can be certain as this deal for America's hottest commercial real estate properties draws closer to a conclusion.
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