Canary Wharf bid approaches set to spark £2bn takeover battle

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The Independent Online

Canary Wharf, the giant property developer in London's Docklands, revealed that it had received several bid approaches, one of which is thought to have come from Brascan, a Canadian conglomerate.

A £2bn bid battle for the company comes at a low point for the property sector and Canary Wharf in particular. Property shares have been sold off on worries about falling rents and rising vacancy rates across London, as the economic downturn has hit the big occupiers.

Canary Wharf has formed an independent committee of non-executive directors, chaired by Sir Martin Jacomb, to examine the approaches and "analyse other options" - which include continuing the programme to return capital to shareholders or break the company up. The committee is be advised by Lazard and Cazenove.

It is understood that the management of the company are not involved - at this stage - with any of the approaches. That includes Paul Reichmann, the Canadian executive chairman and founder of the company, who has a 7.7 per cent stake.

There has been speculation of a bid at Canary Wharf but this had centred on a management buyout. Land Securities, Britain's biggest property company, had also been linked with a bid.

Canary Wharf shares closed up 46 per cent, or 83p, at 263p, valuing the company at £1.5bn. The stock, listed in 1999, hit an all-time low of 132.5p in March - the all-time high is 574.25p in 2000, during the boom which encouraged many investment banks to move to the huge offices available on the Canary Wharf estate.

The company said: "The board of Canary Wharf Group announced that it has been approached by a number of parties in relation to a possible offer.... Discussions are at a preliminary stage and may not lead to any transaction."

The committee of non-executive directors was formed in March, following a plunge in the share price which the board anticipated would lead to bid interest. The company was punished by investors for revealing that under some of the new tenancy agreements previously announced by Canary Wharf, occupiers had the right to "put back" some of the office space to the group.

Alan Patterson, analyst at HSBC, said: "Round about now is the right time to launch a bid for the company. It will report a further fall in the value of the company [in the next results] but after that there should be a strong bounce-back."

Analysts said a bidder would probably need to come up with at least 300p a share or £1.8bn to get serious talks underway. Mr Patterson suggested a successful bid may be pitched at between 350p and 450p a share.

Brascan, a public company originally founded by some of the super-rich Bronfman family, was seen as the most obvious bidder, though it declined to comment. Brascan is well known to Mr Reichmann and he has done deals with the company in the past.

North American private equity players were also considered likely contenders - the deal was considered too large, requiring a commitment to too small a geographical area, to be on the radar of UK players. Yesterday's news could lead to interest from new parties, corporate financiers said.

Brascan announced in April that it had a 5 per cent holding in Canary Wharf, which went up to 9 per cent in May. The Canadian group has stakes in industrial companies, as well as real estate assets, including the World Financial Centre in New York.

Mike Prew, analyst at Smith Barney, said: "Brascan are highly regarded, known for carefully stalking their prey."

Among sector players in the UK, only Land Securities and British Land are thought big enough to contemplate taking on Canary Wharf.