Reichmann manoeuvres to block £1.56bn bid for Wharf

Paul Reichmann, the founder of Canary Wharf, yesterday joined forces with another leading shareholder in the east London property group to block a 265p-a-share bid for the company which has been made by the US investment bank Morgan Stanley.

Mr Reichmann's manoeuvre heightened speculation in the City that the property developer was poised to make his own bid for the Docklands real estate business with the backing of Brascan and Franklin Resources, two other major Canary Wharf shareholders. Together the three control 24.7 per cent of Canary Wharf's share capital.

In an announcement to the Stock Exchange, Mr Reichmann and Brascan said they had signed mutual agreements and lock-up arrangements which meant both would vote against a property disposal next week that is a key condition of the £1.56bn takeover bid Morgan Stanley made for Canary Wharf on 5 December. Franklin, which has a 5 per cent shareholding, has said it, too, would vote against the disposal.

Morgan Stanley needs the support of 50 per cent of Canary Wharf's shareholders to enable its proposed property disposal to go through.

In derailing Morgan Stanley's bid, Mr Reichmann has left the way open to make his own rival offer for the iconic property group. Analysts yesterday said there would be no way Mr Reichmann or his allies would vote against Morgan Stanley's firm offer unless they were confident of tabling an alternative, higher bid expected to come in the new year.

The lock-up arrangements signed between Mr Reichmann and Brascan mean Mr Reichmann has until 31 January to offer Brascan at least 280p a share for its 9 per cent stake, which Brascan has undertaken to accept. If Mr Reichmann does not make an offer then he has agreed to accept an offer from Brascan of at least 267p a share in cash or 242p a share in cash and the rest in paper for his 8.9 per cent stake. Brascan must make an offer by 13 February under yesterday's agreement.

Both putative bids are higher than Morgan Stanley's offer. However, Canary Wharf's independent directors, led by Sir Martin Jacomb, yesterday urged shareholders to stick with the Morgan Stanley deal because it was the only firm offer on the table. The key vote on the properties' disposal is on Monday.