By Ed Ballard, Art Patnaude and Nick Kostov
LONDON--Years of conjecture over the sale of London's
skyscraper-studded Canary Wharf business district appear to be
over.
The Qatar Investment Authority and Canadian investors Brookfield
Property Partners LP are poised to gain control of Canary Wharf's
majority shareholder in a GBP2.6 billion ($3.94 billion) hostile
takeover--adding to Qatar's burgeoning London portfolio and handing
Brookfield a belated victory in a takeover battle that dates back a
decade.
The path to what would be the U.K.'s biggest real estate deal
was cleared when Songbird Estates PLC, which owns 69% of Canary
Wharf Group, said Wednesday that three major shareholders had
decided to back the bid. That move promises to settle a standoff
between Songbird's board and the bidders, and could result in the
company leaving the London Stock Exchange.
London real estate is among the hottest commodities in Europe.
With global investors increasingly allocating capital to property,
London often tops wish-lists due to its stable currency, a legal
system that tends to side with property owners, and ample liquidity
boosted by consistent demand.
Qatar has been a prominent buyer of London's landmarks over the
past decade. It bought the London headquarters of HSBC Holdings
PLC, Canary Wharf's largest building, for more than GBP1.1 billion
in December. It also owns the Shard, the Harrods department store,
Chelsea Barracks, and the 2012 Olympic Village--as well as a 29%
stake in Songbird.
The Canadians have been just as busy in the last 12 months,
pouring $1.9 billion into London real estate, about as much as
Qatar, according to Real Capital Analytics.
Songbird surprised analysts with Wednesday's announcement that
three major shareholders--U.S. investor Simon Glick, China
Investment Corp. and Morgan Stanley--were ready to accept the bid.
Together with QIA, Qatar's sovereign-wealth fund, they own almost
80% of Songbird, and the bidders needed the support of at least one
of the three.
The support of one of the big three shareholders was always key
to swinging the deal, people familiar with the negotiations said.
In that scenario, the other two would have faced the prospect of
remaining minority interests in a company dominated by QIA, with
little prospect of selling their stake on favorable terms.
QIA and Brookfield first approached Songbird in November with a
bid of 295 pence per share. Songbird responded by publishing an
independent valuation that gave the shares a 381 pence price-tag
based on the value of Canary Wharf's pipeline of new office and
residential developments.
James Carswell, an analyst at Peel Hunt, said the big
shareholders have seized a rare opportunity to cash-out, because
the small pool of publicly available Songbird shares has made them
difficult to trade.
"Shares have traded at a discount to net asset value, liquidity
has been poor and this is your opportunity to get out at a price
way in excess of where shares have been trading," Mr. Carswell
said. Shares gained over 7% on Wednesday to trade around 345 pence,
around 33% higher than where they were before QIA and Brookfield
disclosed their approach.
The deadline for other shareholders to register their support
for the bid is 1300 GMT, Thursday. Three small institutions--EMS
Capital LP, Madison International Realty and Third Avenue
Management LLC--have already announced their intention to accept
the offer.
Songbird, originally set up as a listed buyout vehicle, gained
control of Canary Wharf in 2004 after seeing off rival bidder
Brascan--a Canadian investor that later became Brookfield Asset
Management Inc. Brookfield never relinquished the stake it had
built in Canary Wharf Group.
Write to Ed Ballard at ed.ballard@wsj.com and Art Patnaude at
art.patnaude@wsj.com
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