Biggest ever buyout could become biggest ever bidding war

According to reports, US distressed debt specialist Cerberus may look to trump Blackstone’s $36bn offer for Equity Office, the biggest buyout to date.

Cerberus, a US distressed debt and buyout manager, may challenge The Blackstone Group’s $36 billion (€28 billion) agreed offer for US real estate business Equity Office Properties, according to the Wall Street Journal.

Last November Blackstone agreed to pay $19 billion for Equity Office, including $3.2 billion of equity, while assuming the $17 billion of debt already on the company’s books. The combined total of $36 billion made it the biggest leveraged buyout in history. Merrill Lynch, Goldman Sachs, Bear Stearns and Bank of America advised Blackstone on the buyout, with the latter three providing debt financing.

However, recent increases in US office property prices have fuelled speculation that rival bidders could emerge to challenge the Blackstone deal. Cerberus’s reported interest raises the prospect of a bidding war that could send the final offer price even higher.

According to a report in the New York Times, Cerberus may look to team up with specialist real estate investors like Starwood Capital or Walton Street Capital to raise the necessary funds. The size of the bid could reach $38 billion.

Any bid from Cerberus for Equity Office would be an unusual move in the industry, since buyout firms do not generally submit competing offers after a deal has been agreed.

Blackstone declined to comment this morning, while Cerberus could not be reached.

According to proxy documents filed by Equity Office, there were a number of other suitors interested in the company in addition to Blackstone. Though not specified by name in the SEC filings, other parties that reportedly had talks with EOP included other reits such as Vornado and Brookfield Properties, as well as the country’s largest pension fund, the California Public Employees’ Retirement System