See you, raise you?
Watch enough hold ‘em poker on television [Are you admitting you have no life? — Ed. And your point is? — Auth.] and you realize that poker is a story written by authors fighting for the pen, and the genius poker players spin tales with each bet.
Just as I was posting my recent speculations that Blackhawk (the Blackstone-led group) would counter the hostile offer presented by Dove Parent by upping its original buyout bid for trophy REIT Equity Office, than they did it. Blackstone has just re-raised:
The bidding war for Equity Office Properties Trust, one of the nation’s largest commercial landlords, escalated today when the Blackstone Group offered $54 a share in cash, or $38.3 billion, for all of Equity Office’s stock.
Each bet represents a new postulate: true or false?
What does it mean?
The new offer is $5.50 a share more than Blackstone had agreed to pay in November for Equity Office.
With 351 million shares outstanding, it means that Blackstone just upped its bid by $1.93 billion.
Can you pick out the date Blackstone made its bid?
Can you find the date Dove Parent made its bid?
Pretty clearly, Vornado’s offer has made money for Equity’s shareholders.
Equally clearly, Blackstone’s offer wasn’t its best. Which makes one wonder about this little tidbit:
Back in November, Equity Office agreed to pay Blackstone a breakup fee of $200 million if the deal was not completed. Accepting the Vornado bid would have involved paying that fee. The new Blackstone offer, announced today by Equity Office, increases the termination fee to $500 million.
Personally, I don’t understand the logic here. [Must be your naivete. — Ed.]
Approving a $500 million breakup fee, captain, might be considered … illogical
You make a bid to buy a publicly-traded company. Let’s stipulate that the hard work Blackstone did to analyze the company was worth $200 million.
Chiseling out due diligence is wearisome
How hard was it to raise the bid so much? Was $300 million worth of value provided in the interval? Alternatively, should Blackstone get $300 million more for making a second offer that is also topped? (Because that’s the only situation under which the newer higher fee would be paid, isn’t it?)
Equity said its board had unanimously approved the increased offer from Blackstone, –
At one level, the board had no choice: having accepted a lower all-cash offer from a suitor, how could they not accept a higher all-cash offer from the same suitor? As Joe Kleine, Atlanta Hawks center, once said when asked why the Hawks had just signed him to an exorbitant contract, “what was I supposed to do, refuse?”
I’m supposed to drop it?
But I did have one question for the Equity Office Board: why did you agree to the half-billion dollar breakup fee?
Is that too much?
– and said that a shareholders’ meeting to consider the revised offer is scheduled for Feb. 5.
Nevertheless, it said that the Vornado-led group had until the end of this month to submit its own revised offer if it chooses to.
How much of its stack will Dove Parent risk?
In the past, Sam Zell has relished calling himself the grave-dancer. I think he’s planning to enjoy dancing on his own grave.
Will Dove Parent raise yet again?
Last week, another prominent real estate company, Vornado Realty Trust, made a tentative offer of $52 a share in cash and stock for Equity Office, which agreed to share confidential financial information with Vornado officials.
If Vornado made its bid based on public information, how much sharper might its pencil become after it reviews the internal information?
Pencil sharpener or hostile bid gatling gun?
As Edward G. Robinson said to Steve McQueen in The Cincinnati Kid, “you pay to look. Lessons come extra.”
In the big-money world of leveraged buyouts, the lessons are expensive indeed.
