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

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.