Vornado increases Equity Office bid above $40bn(2)

The battle to secure the largest leveraged buyout to date has taken a further twist, after the rival consortium of real estate investors submitted a second counter-bid worth $41 billion for US property business Equity Office.

The consortium of real estate investors led by Vornado Realty Trust has trumped The Blackstone Group’s recommended offer for Equity Office Properties, Sam Zell’s US real estate empire, for a second time.

The Vornado-led consortium has made a $56 per share bid, more than Blackstone’s revised offer of $54 per share. This takes the total value of the deal, including assumed debt, to about $41 billion (€31 billion).

The sweetened offer, which was announced today, comes after yesterday’s deadline for the consortium to complete its due diligence on EOP. A shareholder meeting to vote on the Blackstone offer is scheduled for next Monday.

Blackstone had looked to strike a knockout blow in the bidding war for EOP last week when it increased its bid for $48.50 to $54 per share, as it looked to see off a proposed bid of $52 per share from the Vornado group. However, a revised bid would suggest that the consortium is refusing to back down.

Vornado chairman Steven Roth reportedly approached Zell about a possible merger of the two companies last year but talks stalled, allowing Blackstone to swoop with a $37 billion offer. This spurred Vornado to put together a rival bid in conjunction with Starwood Capital and Walton Street Capital.

Blackstone has argued that the Vornado bid, which would be a cash plus shares deal, is more risky than its own all-cash bid, and would take longer to complete because it requires the prior approval of Vornado’s own shareholders.

The prize at stake, Zell’s Equity Office, is a commercial property empire comprising 543 office buildings across the US.

EOP shares closed yesterday at $55.55, up 89 cents.