Vornado Group Outflanks Blackstone in New Bid for Equity Office REIT

Includes: BX, EOP, VNO
by: Judith Levy

A bidding group of three suitors including Vornado Realty Trust have submitted a $52 per share, or $21.6 billion, takeover bid for Equity Office Properties Trust. The bid outflanks private equity firm the Blackstone Group, by which Equity Office had already agreed to be acquired for $20 billion. The other participants in the new bid are Starwood Capital and Walton Street Capital. Their offer, which amounts to $37.6 billion including debt, is comprised of 60% cash and 40% Vornado stock. The Blackstone deal, which is all cash, is worth $36 billion including debt. Blackstone contends that the Vornado deal is inferior because its value depends on the price of Vornado stock. Equity Office shares, which rose $1.09 to $50.94 yesterday afternoon, reached levels beyond the Blackstone offer price on speculation that there would be another bid. Vornado shares dropped $3.38 to $122.55. Equity Office shareholders will vote on the Blackstone bid on February 5.

• Sources: Bloomberg, Reuters
• Related commentary: Blackstone Acquiring Equity Office in Largest Private-Equity Deal Ever, Vornado Realty Trust: Pleasing Shareholders For Over 30 Years, Blackstone Group's 'Zell Buyout' Is Questionable At Best, REITs Trading At Big Premium To Book Value, REITs vs. Homebuilders -- Not What You Think, Volatility Index [VIX]: Is 10 the New 12?
• Potentially impacted stocks and ETFs: Vornado Realty Trust (NYSE:VNO), Equity Office Properties Trust (EOP). Competitors: Boston Properties Inc. (NYSE:BXP), Mack-Cali Realty Corp. (NYSE:CLI), Brookfield Properties Corp. (NYSE:BPO). ETFs: iShares Cohen & Steers Realty Majors (NYSEARCA:ICF), Vanguard REIT Index ETF (NYSEARCA:VNQ), iShares Russell Midcap Value Index (NYSEARCA:IWS), WisdomTree Dividend Top 100 (NYSEARCA:DTN), iShares Russell Midcap Index (NYSEARCA:IWR)

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