Regus abandons talks to buy rival HQ Global

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Regus, the serviced office rental company, yesterday abruptly pulled out of talks to buy US-based HQ Global, its biggest competitor, just days after revealing that a deal was close to being finalised.

The breakdown in negotiations was caused by the sharp drop in Regus' share price after the talks were made public on Monday; uncertainty about the US economy and HQ's complicated share structure also contributed.

Investors were unhappy that Regus planned to pay about £460m for HQ by issuing new shares at below the 260p price the British company floated at in October. The shares fell 15 per cent after Regus announced that it was in talks. Yesterday Regis shares recovered 15p to 230p, valuing the company at about £1.3bn. Mark Dixon, the chief executive who founded Regus 12 years ago, owns 58.5 per cent of the shares.

A spokesman for Regus admitted that the fall in the share price had "clearly not been helpful" and that the company deemed the deal no longer of benefit to shareholders.

Regus was also concerned about the current lack of visibility in the US market. Analysts had questioned the wisdom of moving into the United States when its economy looked to be on the brink of recession. HQ's profits fell sharply in the first quarter as its margins shrank.

Regus' spokesman said the tie-up would still make long-term strategic sense, but it would not renew its interest "for the foreseeable future". The British group has been courting HQ since November.