Canary Wharf’s Qatari and Canadian suitors went hostile yesterday with a “take it or leave it” £2.6bn bid to win control of the Docklands developer Songbird Estates.
The 350p-a-share offer from the Qatar Investment Authority (QIA) and the property investor Brookfield came less than two hours before a “put up or shut up” Takeover Panel deadline, following an initial 295p offer to the Songbird board last month.
The QIA – owner of a host of assets including Harrods – already has a 28.6 per cent stake in Songbird, which is itself a 69 per cent shareholder in Canary Wharf Group (CWG). Songbird’s swift rejection of the initial approach – plus a revised valuation that put a 381p-a-share, £2.82bn price tag on the business last week – prompted the bidders to appeal direct to other investors over the heads of the board.
The QIA and Brookfield said their “compelling” higher offer came at a 41.6 per cent premium to the average Songbird share price over the past six months. It is also based on the much lower 304p-a-share “triple net asset value” – in effect a break-up valuation – of the business. Most analysts are looking for an offer of at least 400p. Songbird’s share price fell 3.75p to close at 330p.
CWG has built more than 16 million sq ft of office space in the London Docklands area over the past 25 years, and still owns around half of it. Songbird claims a buoyant London office market and the decision of banks such as JP Morgan and Société Générale to relocate to Docklands have bolstered its value significantly. It also believes there are more gains to come from pipeline projects like the development of Wood Wharf and the Shell Centre on the South Bank.
But the bidders argued yesterday that Songbird’s pipeline would “require substantial funding to be raised”, reducing its ability to return cash to shareholders. Wood Wharf alone is expected to cost around £2.5bn to develop, with other schemes costing a further £1.2bn.
Brookfield’s chief executive, Ric Clark, said: “The offer is being made as Canary Wharf embarks on an ambitious development programme that will alter its risk profile.” The QIA yesterday took a 9 per cent stake in Brookfield.
The joint venture has won support from the hedge fund Third Avenue, a 3.5 per cent investor in Songbird, giving the QIA and Brookfield control of 32.1 per cent of the shares. But success will depend on winning over at least one of Songbird’s other big shareholders. The US investor Simon Glick has 25.1 per cent, the China Investment Corporation 15.8 per cent and Morgan Stanley 8.5 per cent. The remaining 21 per cent is held by independent investors, of which Third Avenue is the largest.
As the bidders have declared their offer final, they are not allowed to raise it under takeover rules. They have 28 days to post an offer document and a further 60 days after that before the bid lapses. Songbird’s complex share structure is a legacy of a 2004 takeover battle for CWG in which Brookfield was defeated but left with a 22 per cent stake.Reuse content