Canary Wharf owner Songbird has dismissed as too low a £2.6bn cash bid from Qatar’s sovereign wealth fund and a North American property firm to take full control of the company.
Songbird shareholders have two months to decide whether to accept their “take it or leave it” offer, increased from £2.2bn. The improved bid came 90 minutes before a regulatory deadline on Thursday and cannot be increased again.
The board of Songbird said the new offer did “not reflect the full value of the company, its unique position and future growth potential”. It pointed to a recent independent valuation that estimated its net asset value at 381p a share, up 19% since June as a result of an upturn in property values. But the board will pore over the bid’s 40-page document in the next week before deciding whether to recommend the offer to shareholders, and will write to investors to set out its views in detail.
The Qatar Investment Authority (QIA), Songbird’s biggest shareholder with a stake approaching 29%, and US-listed developer Brookfield offered to pay 350p a share, after their initial 295p offer was rejected last month.
Claiming that the other side did not want to engage, the bidders took their offer directly to shareholders on Thursday, and have to send them the offer document within 28 days. The other main investors are Glick Entities, Simon Glick’s property empire, which owns nearly 26% of Songbird; the China Investment Corporation, an investment arm of the Chinese state, which owns 15.8%, and Morgan Stanley, the US investment bank, with an 8.5% stake. The US hedge fund Third Avenue, which holds 3.5%, has agreed to accept the revised offer.
Miranda Cockburn, an analyst at Oriel Securities, said: “Whilst we believe 350p is still too low and doesn’t attribute any value to the future prospects or management (it sounds as if they would wish to retain the existing key management), ultimately the shareholders have to decide whether they want to take the liquidity now or continue to invest in the longer-term outlook of what is arguably a unique estate at Canary Wharf. This will depend on their individual time horizons and alternative opportunities. If the offer is rejected by shareholders, the shares will inevitably slip back to reflect, once again, the messy capital structure.”
The Canary Wharf financial district in east London has a complicated ownership structure. Songbird owns 70% of Canary Wharf Group, the owner of the estate, while Brookfield holds a 22% stake. Songbird is expanding the Docklands estate for the first time since the banking crisis, with plans for a 3,000-home estate at its eastern edge, called Wood Wharf. It also owns large chunks of the Walkie Talkie skyscraper in the City and the Shell Centre on the South Bank, which it co-owns with QIA subsidiary Qatari Diar.
The QIA, which owns a string of high-profile assets in London including Harrods and the Shard, became a major shareholder of Songbird in 2009 when it stepped in to stop the business collapsing under debt.
The disused Docklands were turned into a second financial district to rival the City of London after 1987, when Margaret Thatcher, then prime minister, asked Canadian tycoon Paul Reichmann to take on the ambitious building project. Reichmann, who died last year, had delivered a similar project in Manhattan, but the London scheme forced his company Olympia & York into bankruptcy in 1992. Three years later, he received backing from wealthy investors including Saudi royal prince Abdulaziz Al Saud to buy back Canary Wharf from the banks, only to lose out to Songbird in the bidding war for Canary Wharf Group in 2004.
QIA declined to comment.
