Brascan interest heats up Wharf war

THE CANADIAN conglomerate stalking Canary Wharf is expected to break cover this week with a £1.7bn bid for the Docklands developer. Toronto-based Brascan Corporation is understood to want to make an offer before a rival bid from a property fund consortium emerges.

That would give Brascan the option of taking Canary Wharf private 'on the cheap', or flushing out a higher bid from rivals and making a quick profit on its 9% stake in the developer.

A Brascan bid could price Canary Wharf at between 290p and 300p a share, or up to £1.75bn.

Meanwhile a rival bidder, a consortium of real estate funds owned by investment banks Morgan Stanley and Goldman Sachs, is understood to have finalised a range of offer prices that could go as high as 310p.

The two American banks are said to have secured the support of Canary Wharf chairman Paul Reichmann. He owns 7.75% of the shares and has warranties that could add 4% to his shareholding. The bank consortium already has the support of the Glick family, which holds the largest single stake in Canary Wharf at 15%.

Simon Glick has already undertaken 'not to accept any third party offer for the company' during his talks with the group.

An offer of more than 300p would leave Brascan with a profit of around £65m from selling its stake. It began buying Canary Wharf shares at the end of April when the stock was trading at 163p. The shares rose a further 6p to 278p in anticipation of an offer this week.

The stock plunged to a low of 132 1/2p in April after Canary Wharf revealed its tenants had the right to hand back a total of 625,000 square feet of unwanted space free of charge before their leases expire.

The pricing and timing of a bid from the banks' consortium is thought to be contingent on Canary Wharf's interim figures due this Thursday.

The results are likely to include a cut in the valuation of the developer's property portfolio to reflect the decline in office property rents.

Deal sources said both suitors have had no problems lining up financial backers for their bids. Canary Wharf has net debt of £3.4bn.

Brascan's advisers, Deutsche Bank and Merrill Lynch, have indicated they would provide debt packages. Merrill's private equity arm could be a co-investor alongside Brascan The banks consortium can fall back on their parent investment banks' cash for debt finance.