Canary Wharf bids fail to win approval

The Independent directors of Canary Wharf, which is at the centre of a £1.5bn takeover saga, rejected one bidder outright yesterday and told another to come back with a more "certain" offer.

The directors of the Docklands property developer revealed that they had received an improved offer from Brascan Corporation, the Canadian property group. This was rejected and "discussions with Brascan have ended", they said.

The situation with the other declared bidder, a consortium led by Morgan Stanley, was more ambiguous. The US investment bank has offered 220p a share in cash plus equity worth 35p in a new vehicle that would be listed on the Alternative Investment Market.

The independent directors committee, led by Sir Martin Jacomb, was willing to recommend the Morgan Stanley offer "on the basis that it believed, over time, the equity participation could enable shareholders to realise value in excess of the headline figure of 255p". But not all shareholders agree with this assessment. The committee said it was "concerned, however, that in the light of representations from certain shareholders, this proposed offer may not provide a sufficient degree of certainty, although discussions continue".

It is understood that several institutional shareholders have told the company that they cannot hold shares in an AIM-listed entity. With a significant amount of selling therefore expected when the new vehicle is listed, shareholders are concerned that they will not be able to realise the promised 35p a share.

Canary Wharf is now in negotiations with Morgan Stanley about providing some assurance on the equity element of the bid. This could involve, for instance, Morgan Stanley undertaking to buy the stock at 35p from any institution wanting to sell out.