Poetic Business Moguls Compete in Bidding War

So how did poetry kick off one of the largest acquisition battles in Wall Street history?

Simple. The major players in a massive struggle for the largest U.S. commercial real estate company felt inspired to write.

"Roses are red, violets are blue; I hear a rumor, is it true?"

The rhythm may not be perfect, but real estate mogul Samuel Zell's intention in this e-mail obtained by The New York Times is only too clear. He was fishing for a response from shopping mall maestro Steven Roth of New Jersey and his company, Vornado.

Private equity buyout giant the Blackstone Group, based in Manhattan, N.Y., had already confirmed one offer for Zell's Equity Office Properties, worth $48.50 a share.

Zell wanted more, and had heard that Vornado's Roth was interested. He was.

"Roses are red, violets are blue. I love you Sam, our bid is 52," Roth replied to Zell in his own e-mail, confirming a higher bid of $52 a share.

But it was not enough to secure the acquisition of Zell's firm, which owns large tracts of office space in Atlanta, New York and Chicago.

Blackstone Group's high-profile CEO launched a second, higher bid of $55.50 a share, worth $39.2 billion in total. Blackstone's second bid was enough to clinch it, but that's not to say that the poetry was not appreciated.

Blackstone's final offer of $55.50 per share was a 15 percent increase from its first bid in November, when the private equity firm offered $48.50 per share.

Blackstone the Real Estate Winner

As a result of the bid entered Tuesday, Blackstone will become a landlord overseeing one of the nation's most impressive commercial real estate portfolios, including WorldWide Plaza in Manhattan, the Civic Opera building in Chicago, and Columbia Center, Seattle's tallest tower.

"We are pleased to have secured what we believe is a compelling investment for Blackstone investors, and gratified by the overwhelming support of EOP [Equity Office Properties] shareholders," said Blackstone spokesman John Ford.

Vornado, which sweetened its bid twice, ultimately offering $23.2 billion in cash and stock, bowed out hours before Equity Office shareholders overwhelmingly approved the Blackstone bid.

The Paramus, N.J.-based real estate investment trust said the premium it would have to pay to top Blackstone's offer wouldn't be in the interest of its shareholders.

"We thought $48.50 [per share] was a very good price," said Richard Kincaid, chief executive officer of Chicago-based Equity Office. "And when you start to get to $55.50 [per share] and someone has to top that cash offer that closes in a couple of days with a stock and cash mix. … I think it got to the point where they realized it just wasn't enough profit."

Blackstone's acquisition, which it valued at $39.2 billion including assumed debt, is scheduled to close Friday. Equity Office had about $16.5 billion in debt reported as of Sept. 30.

Research firm Dealogic says that figure would make it the largest private equity buyout in history when debt is included in the valuation.

Excluding debt, the deal would be the second-largest private equity buyout. The largest was the $25.1 billion acquisition of RJR Nabisco Inc. in 1988 by the investment group Kohlberg Kravis Roberts & Co.>

While Blackstone's offer was favored by investors and shareholders -- more than 92 percent of ballots cast during the vote supported the acquisition -- experts said the private equity firm might have spent too much.

'A Huge Premium'

  • 1
  • |
  • 2
Join the Discussion
blog comments powered by Disqus
You Might Also Like...