Equity Office Won by Blackstone; The Saga Finally Ends

If you have been following the bidding process for Equity Office Properties Trust (EOP-NYSE), you will be glad to know that it is FINALLY over.  Vornado (VNO-NYSE) has decided to withdraw its offer based on the latest hike from Blackstone.  Yesterday Blackstone raised the bid price to $55.50 per share, up roughly 15% from the original November bid of $48.50.

Vornado had a $56.00 ‘implied’ bid, but this was cash and stock and came with some conditions outside of the plain-jane cash bid with all approvals and permissions not a condition.  Vornado should be breathing a sigh of relief at this point, and with shares up 3% at $130.85 that is evident.  They would have had to have paid out a $720 million break-up and termination fee to Blackstone to win the deal.

This deal was also getting to the point that on paper it stopped making much sense to outsiders.  It is unknown how much of this transaction ended up being based on pride rather than actual value, and it even makes one wonder that certain deals may be done because of the size of the deal rather than based on the real value.  Private equity is changing, now we’ll need history to determine if it is for better or worse.  Blackstone is very well entrenched and has deep pockets and incredibly talented teams inside of it, so this isn’t a pure second-guessing of the transaction.  As an outsider myself I will be the first to admit that insiders and deep-pocket bidders can see the real value that outsiders do not have access or insight into.  These firms each must have known how they could spin certain properties off and unlock some core values that would not have been available to others.

Jon C. Ogg
February 7, 2007