Investors applaud rejection of Qatar's low Canary Wharf bid

 

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The Independent Online

Qatar will have to reach deeper into its oil-rich pockets to win control of Canary Wharf after the board of the Docklands’ developer “unanimously” rejected a £2.3bn bid yesterday.

The Qatar Investment Authority (QIA) has teamed up with the Canadian developer Brookfield to win full control of Songbird Estates, itself the 69 per cent major shareholder in the Docklands landlord and developer Canary Wharf Group.

The joint venture’s lowball 295p-a-share offer, however, was immediately dismissed as “significantly undervaluing” the business. Shares in Songbird eased to 310p but remain well above the opening pitch, indicating that the City is expecting a higher bid.

David Cumming, the head of equities at major investors Standard Life Investments, said: “We are pleased to see that the Songbird chairman David Pritchard has rejected the bid proposal from the Qatar Investment Authority and Brookfield. From our perspective, the offer is so low it can’t be taken seriously and is not a credible basis for corporate engagement.”

The QIA, which counts Harrods among its high-profile property assets in London, declined to comment.

City analysts have put a price tag of as much as 400p on Songbird – valuing it at £3bn – after dismissing the opening offer as “far too low”.

CWG has a massive 11 million sq ft development pipeline in London, including the Wood Wharf extension to the original estate and the overhaul of the Shell Centre on the South Bank. The company has built more than 16 million sq ft of office space in Docklands over the past 25 years, and still owns around half of it.

The opening offer from Qatar and Brookfield even came in below Songbird’s net asset value per share – an important measurement in property – of 319p. Canary Wharf, meanwhile, is gearing up for its next stage of growth, with its workforce set to expand beyond the current 105,000 as it challenges the City for financial supremacy. Société Générale recently became the latest bank to move its London base to Docklands and Crossrail arrives in 2018.

James Carswell, an analyst at Peel Hunt, said the QIA and Brookfield would have to pull off the “largest UK property transaction this decade” – surpassing Peel Holdings’ £1.6bn for the Trafford Centre in 2011 – to land Canary Wharf. “Given the inherent value within the development portfolio, we are not surprised by the rejection of 295p. An improved offer remains a real possibility.”

The QIA already owns a 28.6 per cent stake in Songbird, and is currently vying to buy HSBC’s Docklands headquarters for about £1.1bn. It became a major shareholder in 2009 as part of a bailout for CWG, which came close to collapse amid plunging commercial property values. The joint venture would have to buy out other stakeholders including the US investor Simon Glick, Morgan Stanley and China Investment Corporation.

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