Canary Wharf profits hit by £11m bid battle

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The Independent Online

Canary Wharf, the Docklands property group, yesterday said it had spent £11m on advisers in the past six months to help it decide whom to sell itself to.

The company is at the centre of a tussle between two bidders, both offering £1.6bn. One is from a consortium led by Morgan Stanley and the other is from Brascan, which is backed by the Canary Wharf founder and former chairman Paul Reichmann.

The acting chairman Sir Martin Jacomb and the chief executive George Iacobescu said the bidding process was expected to be resolved soon.

Canary Wharf said the bid costs and interest payments on its highly leveraged Docklands estate, which outpaced rises in rental income, hit its profits.

The company announced a decline in half-year pre-tax profits to £2.8m in the six months to 31 December, versus £5m a year ago.

"[The bid process] is expected to be resolved in the near future and the process is the subject of announcements by the Independent Committee of Directors, which comments separately on such matters," Canary Wharf said in a statement.

The company's independent committee is charged with evaluating bid approaches. The property group became a takeover target last June after its performance and share price were hit by a downturn at its key financial services clients.

Mr Iacobescu said the company was well placed to take advantage of any improvement in market conditions. But it could experience pressure on its rental income as it predicted more office space was likely to come on to the central London market in the next few months, peaking in mid-2004.

Canary Wharf reported diluted net asset value, a key performance gauge, of 315p, up from 312p six months earlier.

Canary Wharf initially backed Morgan Stanley's bid. It has told shareholders not to accept a rival offer by Brascan because it may prevent Morgan Stanley from raising its offer.

Separately, the business parks operator Slough Estates said it needed to increase its speculative building programme to cope with an expected upturn in demand in 2005 and beyond.