CHICAGO-Sam Zell has upped his ante for the potential purchase of a stake in Denver-based Archstone.
Zell’s Equity Residential said this morning it has extended its bid deadline for the 26.5% stake, but agreed to increase its offer from $1.3 billion to almost $1.5 billion.
The move will likely set up a new bidding war with Lehman Bros. The bankrupt New York City-based firm had owned 47% of Archstone, and in January agreed to buy another 26.5% of Archstone from two banks to prevent a sale to Equity. Now Bank of America and Barclays Bank have offered to sell their remaining joint 26.5% stake to Equity, though Lehman again has the right of first purchase.
Equity had been considering an offer of $1.3 billion for the remaining bank interest in Archstone, but a deadline to make the offer was approaching. This morning, Equity said it has extended the official offer deadline to April 19 with the banks, though as part of the extension agreement the price has increased to $1.48 billion.
Lehman may have trouble matching the new bid amount. The company has said it would buy all of the bank’s 53% shares for $2.6 billion, and wanted to avoid a bidding war. Lehman said it doesn’t want Equity to have a stake in Archstone. Lehman received approval to exit Chapter 11 bankruptcy this year. A Lehman spokesman did not return a request for comment.
Equity said in its statement today that it has incentive to wage a strong bidding war, as the company will receive an $80 million fee if Lehman tops and wins with a higher bid. It would be silly to leave that much money on the table, said Equity CEO David Neithercut during the company’s recent fourth quarter conference call.
Archstone has 48,922 apartment units, including 14,000 in Germany. Equity owns or has investments in 417 properties in 15 states and Washington, DC. The company has said it would fund the purchase through cash, debt, sales and its $1.2 billion revolving credit facility.
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