Barbarians: the zwischenzug
German is such a lovely language for expressing complex belligerent thoughts,
and so the same tongue that accommodates blitzkrieg, weltschmerz, schadenfreude, and zeitgeist, has also given us the useful chess term zwischenzug, meaning an in-between move, used in the middle of an otherwise forcing chess combination to upset the opponent’s timing, and hence to change the balance of power in a complex tactical situation.
Perhaps the most famous zwischenzug ever.
White plays 8 Bxb8, and instead of recapturing, which loses (to 9 Qa4+),
black replies 8 … Nd5!, forcing the humiliating climbdown 9 Kf2.
As reported in the New York Times, such a move was deployed yesterday by Vornado, in its continuing quest (documented in several recent AHI posts) to capture the Equity Office REIT:
Firing another round in the high-stakes battle to acquire Equity Office Properties, Vornado Realty Trust offered last night to modify its $41 billion bid for the company, the nation’s largest owner of office buildings, by paying the cash portion of its offer within a few weeks.
Like that other German chess term, zugzwang, the essence of a zwischenzug disrupting the opponent’s timing to gain spatial, positional, or material advantage.
After Black plays … Rxh4, White could retake,
But Qd8+ is superior, as it allows QxH4 with check, and then Qxg3 winning a Rook
Blackstone has said it could complete its purchase of Equity Office, the nation’s largest office landlord, within days after shareholders approve the merger. Vornado’s offer of 45% in stock and 55% cash would set off a vote by its shareholders, which would delay the completion of the transaction.
Many of them are small repositionings — a harmless check here or there that forces the king to retreat a rank — but sometimes they have a more potent effect, such as highlighting a contrast:
On Friday, Equity Office reaffirmed its support of Blackstone’s all-cash bid of $54 a share, saying that the Vornado offer — though higher, at $56 a share in cash and stock — carried more risk.
Thinks Vornado, Equity Office’s management associates itself with the first suitor? Then we shall test their commitment:
In its modified bid yesterday, Vornado did not offer to increase the amount it would pay, but said it was responding to Equity Office’s “concerns about the speed and certainty” of its offer. Vornado now says it is willing to pay cash up front instead of when the deal closes, which would take more than three months.
Assuming that Vornado can arrange short-term financing — hardly a heroic assumption — this little step costs nothing, demonstrates flexibility and customer-centrism, and responds to the stated concern (always a deft way of wrong-footing the other party):
A vote of Equity Office shareholders is scheduled on Wednesday.
Vornado’s move also keeps its name in the headlines, looking like the white knight, and demonstrating renewed and enduring passion. As Nancy once said to me, “Enthusiasm is always attractive.”
An Equity Office spokesperson said last night that the Equity Office board would “review Vornado’s proposal in due course.”
Whichever suitor prevails, the transaction will be the largest leveraged buyout ever.
Who chooseth me will gain what many men desire
Which echoes our initial post several weeks back:
The winner will be he who has the most economic courage:
Who chooseth me must give and hazard all he hath.
Naturally, a suitor puts his best foot forward:
He hides as like a snake in the grass
“Vornado believes this gives EOP shareholders the best of all worlds,” the statement said. It cited three advantages: “superior price; substantially shortened time for receiving a majority of the consideration; and certainty.”
Blackstone said last week that it would not try to top Vornado’s offer, but analysts say the fight is far from over. Blackstone said last night that it had no immediate comment on Vornado’s new proposal.
In my uninvited opinion, Blackstone should do something, even as little as upping its bid by $0.50 per share [Easy for you to give away $175 million of someone else’s money! — Ed.], so as to demonstrate that its ardor matches Vornado’s. That may seem silly — money talks louder than everything else combined — but nevertheless, a gesture might tip the scales.
Blackstone on one side, Vornado on the other
If Vornado prevails, it would have to pay a $500 million breakup fee to Blackstone, which is considered small for a deal of this magnitude.
Which will not sit quite as well with Equity Office’s shareholders.
Vornado has said it planned to retain half of the portfolio assembled by Equity Office’s founder, Samuel Zell, and to sell the remainder to two private equity companies, Starwood Capital Group and Walton Street Capital, which were its partners in its original bid.
Barry Vinocur, the editor of REIT Wrap, a daily newsletter, said that it was unclear if all of Equity Office’s concerns about the Vornado bid had been addressed. It could “marginally shift things in favor of Vornado,” he said.
Are the odds tilting in Vornado’s favor?
