The battle to secure the world’s largest leveraged buyout took a new twist yesterday, after alternative asset manager Cerberus reportedly pulled out of the consortium plotting to trump Blackstone’s $36 billion ($28 billion) offer for Equity Office, a US commercial real estate business.
The Financial Times reports that Cerberus pulled out of the consortium after weekend negotiations proved inconclusive, and is unlikely to rejoin the fray.
Cerberus’s withdrawal leaves any potential bidding war as a straight fight between private equity and real estate investors.
Blackstone had a $36 billion offer for Equity Office accepted by the company’s board in November. It remains in pole position, particularly now that Cerberus is no longer in the picture.
The rival consortium comprises Vornado Realty Trust, which has only just joined the group, Starwood Capital and Walton Street Capital, three US real estate investment groups.
These three firms may now look to find another investor to replace Cerberus, the report said. However, other buyout firms may be reluctant to join them, since private equity firms do not generally bid against their rivals after a deal has been agreed.
The consortium still has time on its side. Any new bids would have to be submitted by February 18, the deadline for Equity Office bondholders to sell to Blackstone.
Blackstone’s real estate operation is co-headed by senior managing directors Jonathan Gray and Chad Pike.