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UPDATE 1-DEALTALK-Qatar needs charm, lavish bid to cage Songbird
June 18, 2010 / 6:07 PM / in 7 years

UPDATE 1-DEALTALK-Qatar needs charm, lavish bid to cage Songbird

(For more Reuters Dealtalk stories, click on [DEALTALK/])

* Qatar likely bid for majority owner of UK office landmark

* Songbird Estates could be worth more than 200 pence/shr

* Other Songbird majority shareholders may block deal

(Adds closing share price)

By Sinead Cruise and Langi Chiang

LONDON/BEIJING, June 18 (Reuters) - Qatar will have to charm demanding shareholders and stump up a big premium if it wants to add London business district Canary Wharf to a UK investment shopping spree as the capital’s prime office market rebounds.

Qatar Investment Authority’s (QIA) chances of making a successful tilt for the 76 percent of Songbird Estates SBDE.L it does not own rest with New York investor Simon Glick with 23.95 percent of Songbird, China Investment Corp [CIC.UL]. (CIC) with 14.7 percent, and Morgan Stanley (MS.N) with 3.1 percent.

The stake is tipped to carry a price tag of 700-850 million pounds ($1-1.3 billion). One top-10 investor put it above that range, valuing the shares at more than 200 pence each, which would give 76 percent of the company a price tag near 950 million pounds.

Songbird shares closed at 156.5 pence on Friday.

A bid from the sovereign wealth fund, with 23.96 percent, could be pitched to secure a 75 percent stake in Songbird to force a delisting, or be rich enough to achieve 90 percent acceptances, allowing it squeeze out minority holders.

QIA is seen making a statement about its Songbird stake shortly, likely on Sunday. Any move would follow Qatar’s recent London purchases of department store Harrods and the Park House development on Oxford Street, a major shopping corridor.

In either scenario, the trinity of majority shareholders represents a large blocking stake. Winning these stakeholders around could be Qatar’s toughest test.

“I think (of) the Chinese, particularly; they have just bought a 15 percent stake. Did they buy it for a quick 20 percent return or whatever the bid might be? I think not,” said a Songbird shareholder.

“I think they were buying this thing for a long-term play on the London office market ... in an environment such as this where capital values are obviously stabilising and appear to be going up, they would be missing out on a lot of the upside that appears through the cycle,” he said.

The top-10 investor pointed out shares were trading at a significant discount to net asset value. “So for a take-out price, I think you’re looking at 200 pence plus. But as I say, it won’t be up to me to decide -- it’s up to Glick and the Chinese to decide on that,” he said.

A London-based spokeswoman for QIA declined to comment on a possible bid. CIC also declined to comment.

Songbird holds 69.3 percent of Canary Wharf Group (CWG), operator and manager of Canary Wharf estate.

Execution Noble analyst Michael Burt said it was natural for Qatar to want to take Songbird private, and then attempt to buy out the rest of CWG. He said a bidding war between QIA and CIC, another giant sovereign wealth fund, was possible if it intended to be a long-term investor.

If CIC considered its stake in Songbird opportunistic, Burt said an offer of about 170 pence a share could be tempting, based on its 100 pence entry price.

Shares in Songbird closed up 4.9 percent at 160 pence, after rising up to 15 percent in earlier trading, outperforming flat UK property stocks .FTELUK.

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Even if QIA does manage a Songbird coup, it will likely be just as hard for it to convert that company’s majority holding in CWG to full ownership.

Songbird holds a more than two-thirds stake in CWG, the balance being held by a consortium led by Canadian pension fund Ontario Teachers Pension Plan and including United States-based Brookfield Asset Management.

Ownership of Canary Wharf has been hotly contested over the years, with previous owners including Canadian property tycoon Paul Reichmann who founded the development project and only last year sold his stake in CWG to Songbird.

“I think the Canadian investors that are left in it are very stubborn (about selling out of CWG) but everyone has got a price, and if they are given an exit they deem good value, something could happen,” Burt said.

Meanwhile, minority Songbird shareholders are resigned to having little say in the outcome.

“I have never been so in the dark on any of these things in my life,” a second institutional investor said. (Reporting by Sinead Cruise, Daryl Loo, Andrew Macdonald and Quentin Webb in London and Langi Chiang in Beijing; Editing by Sharon Lindores) ($1=.6743 Pound) (See www.reutersrealestate.com for the global service for real estate professionals from Reuters)

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