Qatar and Canada began a new chapter in the 34-year history of the transformation of London’s Docklands yesterday with a £2.6bn bid.
The Qatar Investment Authority (QIA) and the Canadian developer Brookfield secured the backing of investors holding nearly 86 per cent of shares in Songbird Estates, the property company behind the east London financial district. The 350p offer expires today.
The move both expands the London portfolio of the QIA – owner of Harrods – and means it will oversee the next stage in the evolution of Docklands three decades after Margaret Thatcher first set up the London Docklands Development Corporation in 1981.
Since building began in 1988, more than 16 million square feet of office space has been erected in Docklands. Songbird, through its 69 per cent stake in developer and landlord Canary Wharf Group, still owns about half of that.
QIA already owned 28.6 per cent of Songbird through a bailout in the wake of the financial crisis in 2009. The suitors first tabled a low-ball 295p a share offer in November, but raised it to a final 350p last month. The battle was eventually decided away from the public eye as Songbird admitted yesterday that three of its major private investors were likely to accept the bid.
The joint venture – advised by investment bankers including the rainmaker Ken Costa – will now oversee a huge 11 million square foot development pipeline, including Wood Wharf in Docklands and the Shell Centre on the South Bank.
Songbird still believes the 350p per share offer undervalues the business, because a property boom in the capital and the arrival of Crossrail, the new east-to-west rail link due for completion in 2018, will boost the firm’s value.
Songbird put a 381p-a-share price-tag on its head early in the saga and cast the net for a rival bidder as soon as QIA and Brookfield posted their final offer, without success. Sources said there were detailed discussions with two other possible buyers which ran out of time ahead of today’s bid deadline. “No such offer has been forthcoming to date and the board believes that none will now be forthcoming before the first closing date,” Songbird said.
The China Investment Corporation holds 15.8 per cent of Songbird, taking its stake alongside QIA five years ago. The US investor Simon Glick holds 25.1 per cent, and Morgan Stanley 8.5 per cent as a relic of a 2004 takeover battle for the then-listed Canary Wharf Group.
Stanley and Mr Glick formed Songbird to bid for Canary Wharf and fought off Brookfield – then called Brascan – for control, leaving Brookfield with a 22 per cent stake in CWG. Brookfield was backed by Paul Reichmann, the billionaire head of Canary Wharf’s original developer, Olympia & York, who died in 2003. Sources said the 350p offer appealed to the major investors, standing more than 100p ahead of the average price over the six months before the bid emerged.
The Aim-listed firm also warned that minority shareholders could become trapped in the company if the winning bidder failed to reach the 90 per cent point at which it can automatically buy up remaining shares, but decided to go ahead with a delisting anyway.
Songbird’s new owners have committed to retain existing key management staff, although the company will be simplified.
Sir George Iacobescu, the chairman and chief executive of CWG and one of the architects of the modern Canary Wharf, said: “In the future, Songbird and Canary Wharf will become one and the same company, which will be beneficial for the company. As the person running Canary Wharf, two of the biggest companies in the world have decided to buy into the future of the company. That’s a major endorsement of the company and the management.”
Songbird’s shares rose yesterday by 25.5p, nearly 8 per cent, to 346.5p – close to the offer price.
Miranda Cockburn, an analyst at Oriel Securities, said: “This is a surprise announcement to us because, in our view, the response circular gave a thorough and detailed rationale as to why the offer did not reflect the full value of the company. However, as we have stated before, without full knowledge of the major shareholders’ individual circumstances it was always going to be difficult to second-guess the outcome.”
The main players: Who's behind the deal?
Publicity-shy New York-based investor whose family made a fortune trading diamonds. Part of billionaire Paul Reichmann’s consortium which bought Canary Wharf in 1995, following its slide into administration. Runs family’s global property empire, Glick Entities.
Sir George Iacobescu
Romanian-born engineer who fled Ceauşescu’s communist regime in the 1970s. Arrived in London in 1988 and oversaw construction budget and delivery of Canary Wharf, staying with the project when Olympia & York went into administration in 1991. Became chief executive in 1997 and has built more than 30 buildings in Docklands.
Legendary City rainmaker, drafted in by Qatar Investment Authority as one of its Songbird board nominees in November. A leading light in investment banking for more than 35 years, chairing Lazard and the European arm of UBS’s investment bank. Also chairs Alpha International, which promotes the Alpha course (an introduction to the Christian faith occasionally accused of cultish tendencies).
Sheikh Abdullah bin Mohammed bin Saud al-Thani
Newly appointed chief executive of QIA, one of the world’s most powerful sovereign wealth funds with an estimated $300bn (£198bn) portfolio, including major stakes in banks such as Barclays and Credit Suisse as well as Sainsbury’s supermarkets.