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GlobeSt.com UPDATE: Canary Wharf Deal Unravels

LONDON-The deal to sell Canary Wharf looks to have unravelled with the company's independent directors rejecting both Morgan Stanley's bid and an improved offer from Brascan. And chairman Paul Reichmann has stepped down while he tries to form a bid consortium of his own.

By Graham Parker | Updated on November 13, 2003

LONDON-In the face of mounting shareholder pressure to secure a better price for the Docklands developer, the Canary Wharf independent directors have rejected the two offers currently on the table. Morgan Stanley had offered 255p per share and Canadian investor Brascan had offered slightly less.

The move has put pressure on the company’s chairman and founder Paul Reichmann to put his money where his mouth is and come up with a better price. In a statement yesterday Reichmann said: ” I am proposing to continue with the endeavours, which I have recently began, to form a consortium with a view to its making an offer to the shareholders of the company at a level in excess of that reflected in the offers received so far. I have therefore concluded that it would be appropriate and proper that, while remaining an executive director of the company, I should temporarily step aside from my duties as chairman of the board.”

But it is by no means certain that Reichmann will be able to fund a higher bid, and as a result the directors are already preparing plan B—a sale of assets to reduce the company’s debt mountain. Sir Martin Jacomb, who takes over from Reichmann as chairman, said: “The company will implement in an orderly way some asset disposals, while maintaining the integrity and overall control of the estate. In this way weshall be in a position to reduce overall leverage.”

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