Denouement in Canary Wharf auction as Brascan hangs on

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The Independent Online

A quickfire auction will kick off this morning to settle the protracted £1.7bn bid battle for Canary Wharf, which will conclude by the end of this week.

A quickfire auction will kick off this morning to settle the protracted £1.7bn bid battle for Canary Wharf, which will conclude by the end of this week.

Shares in the property company being stalked by two bidders closed at 296p last night, above the best bid so far received, indicating some investors were betting that the auction would produce higher offers. As it stood last night, Morgan Stanley had offered 292p a share, via a "scheme of arrangement", while the Canadian developer Brascan had offered 275p through a conventional bid. Canary Wharf is the company behind the giant office development in London's Docklands.

One analyst, who did not want to be named, said that Brascan, which is also a Canary Wharf shareholder, may be inclined to take Morgan Stanley's money. He estimated that Brascan acquired its 9 per cent stake or 53 million shares in Canary Wharf at an average price of 167p, leaving it sitting on a very healthy profit if it accepted Morgan Stanley's 292p-a-share offer.

Brascan said yesterday it has the support of 22.2 per cent of the shares in Canary Wharf. This is significant because Morgan Stanley's offer needs 75 per cent acceptance and Brascan speaks for nearly enough shares to block the US bank.

However, Brascan can only definitely count on its own 9 per cent shareholding, plus the 8.9 per cent owned by Paul Reichmann, the chairman of Canary Wharf, who has formed an alliance with Brascan. Franklin Mutual, a US investor with a 6 per cent stake, which had previously sided with Brascan, would play a key role, analysts said. Franklin has not stated which way it will now vote but had previously said it would switch sides to Morgan Stanley if it offered 292p or more.

Brascan said yesterday it had extended its offer for Canary Wharf by 11 days to 19 April. Friday 16 April is the deadline set by the Takeover Panel to conclude the bidding process, which has run since last summer.

According to the rules set by the Panel, either side can change its offer today, which means the rival bidder could come back tomorrow. In those circumstances, Friday would provide the final opportunity for each bidder to revise its offer.

However, if neither side makes a move by 5pm today, that will be the end of the auction, with the final bids standing as they did last night.

The auction process produces final bids from each side but it is then up to shareholders to decide which offer to go for.

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