Morgan Stanley looks to trump Wharf bid

Morgan Stanley said it was considering raising its bid for Canary Wharf and turning it into a conventional takeover offer.

The US bank was forced to consider changes after rival bidder Brascan, a Canadian developer, earlier this week gathered enough support to block the Morgan Stanley offer which was structured as a "scheme of arrangement" - requiring 75 per cent support from shareholders. Morgan Stanley said: "Silvestor [the bid vehicle] is in detailed discussions with a number of parties regarding several potential alternatives with respect to its offer for Canary Wharf. These include switching to an offer structure and otherwise changing the structure of its acquisition to avoid its superior offer being frustrated by a minority."

Brascan and Morgan Stanley are both offering 275p a share or £1.6bn for Canary Wharf, which owns the giant office development in London's Docklands.

Morgan Stanley is believed to be talking to partners that could help finance a higher bid. These negotiations include British Land, the property group headed by John Ritblat, which is interested in buying the vast shopping complex that has been built under Canary Wharf.

One industry source said: "John's been sniffing around. But he would do a deal as readily with Brascan as with Morgan Stanley." One key shareholder, Franklin Mutual, which has a 7 per cent stake in Canary Wharf and has backed Brascan, has said it will only switch allegiance if it is offered 292p a share or above.

Morgan Stanley also faces the question of "awkward minorities" even under a conventional offer - which requires 90 per cent acceptance before a bidder can compulsorily buy out the remaining shareholders. Brascan, which has 9 per cent, has teamed up with Canary Wharf founder Paul Reichmann, who also has a 9 per cent stake, as well as Franklin. They have indicated that they will not sell to Morgan Stanley, potentially threatening its plans to sell off the Canary Wharf estate if it wins.

However, one source close to Morgan Stanley said: "We are not convinced that they would want to retain their minorities. There's always a lot of bluff in these things."

One big benefit for Morgan Stanley in changing its offer structure is that its ally, the US investor Simon Glick, would be able to vote his 14.5 per cent stake in favour of the deal. Under the scheme of arrangement approach, Mr Glick was not able to use his shares because he was part of the group making the offer.

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