The consortium of real estate investors led by Vornado Realty Trust has revised its offer for Equity Office Properties, Sam Zell’s US commercial real estae empire, in an effort to best The Blackstone Group’s recommended bid.
The Vornado-led consortium has offered $56 per share in both cash and Vornado stock for the largest owner of office buildings in the US. Blackstone’s last offer for the company, submitted last week, was $54 per share in cash. Vornado’s new bid could take the total value of the deal, including assumed debt, to approximately $40 billion (€31 billion).
The sweetened offer, which was announced by Vornado this morning after feverish speculation that a new bid was forthcoming, comes after yesterday’s deadline for the consortium to complete its due diligence on EOP. A shareholder meeting to vote on the Blackstone offer is scheduled for next Monday.
Blackstone had looked to strike a knockout blow in the bidding war for EOP last week when it increased its bid for $48.50 to $54 per share, as it tried to counter a proposed bid of $52 per share from the Vornado group.
Vornado chairman Steven Roth approached Zell last year about a possible merger of the two companies but talks stalled, allowing Blackstone to swoop in with a $37 billion offer. That spurred Vornado to put together a rival bid in conjunction with Starwood Capital and Walton Street Capital.
As part of its new bid, Vornado is offering $31 per share in cash plus $25 in stock. In addition, the company said it was in discussions to sell approximately $10 billion of EOP assets to Starwood and Walton Street at closing. It also expects to sell another $10 billion of the company’s properties within the first year of closing.
In the past, Blackstone has argued that the Vornado bid, which would be a cash plus shares deal, is more risky than its own all-cash bid, and would take longer to complete because it requires the prior approval of Vornado’s own shareholders.
However, Vornado’s revised offer includes a collar on Vornado’s stock price, which ensures that EOP shareholders will receive $56 per share if Vornado’s share price remains between $115 per share and $135 per share. Yesterday, Vornado’s shares closed at $122.35 and have begun moving up slightly in trading this morning.
EOP shareholders are scheduled to vote on the Blackstone deal on February 5, which, if approved, could close on February 8. EOP shares closed yesterday at $55.55, up 89 cents, though it has trended down in early morning trading.
The prize at stake, Zell’s Equity Office, is a commercial property empire comprising 543 office buildings across the US.