Banks join forces to bid in Canary Wharf auction

The investment banks Goldman Sachs and Morgan Stanley have joined forces to make an estimated £1.6bn bid for the Docklands property company Canary Wharf, in a surprise move that cuts the number of bidders to two.

The investment banks Goldman Sachs and Morgan Stanley have joined forces to make an estimated £1.6bn bid for the Docklands property company Canary Wharf, in a surprise move that cuts the number of bidders to two.

The offer from the pair, which could be confirmed as soon as today, is thought to have the backing of the Glick family, Canary Wharf's biggest shareholder. Although the Glicks are thought to have the option of switching sides to ensure they are on the winning team, their backing at this stage puts significant momentum behind the banks' joint bid.

Canary Wharf, which put itself up for auction, last week received two indicative offers, the second from the Canadian property company Brascan. Speculative investors who have pushed up the Canary Wharf share price are likely to be dismayed by the Goldman Sachs decision to join Morgan Stanley's bid rather than participate in the auction alone.

Although the two US institutions are fierce rivals in investment banking, they both have strong property investment funds. They are believed to be working together because Canary Wharf is already highly-leveraged and a bidder would need to ensure a substantial portion of its offer is in cash rather than debt.

The twist comes as investors wait to see what Canary Wharf's chairman, Paul Reichmann, is planning and whether he might affiliate himself with the banks, with the rival bidder, or form a third consortium to try to get control.

The backing of the Glick family, which owns 14.5 per cent of Canary Wharf, puts the banks in a strong position to tempt Mr Reichmann into their camp. Mr Reichmann, who owns nearly 8 per cent of the company, declared last week that he was "discussing his possible involvement with third party potential offerors".

The company said then that Mr Reichmann had indicated he might consider forming a consortium to make an offer for the company "depending on the outcome of these discussions and the terms of any offers" for Canary Wharf.

One source said: "At the moment, it's a two-horse race. But what Paul Reichmann chooses to do really will be key. If he sides with Brascan, it obviously opens it all up, but he's got dual motives. He's interested as an investor but he'd also probably be interested in still being involved in running the company."

While the Glick family are said to be backing the Morgan Stanley offer, they are not, it is thought, completely tied to it.