"The true value of Vornado's offer should reflect a discount for stock, the 3-4 month time delay before receiving it and the risk of Vornado's share price declining below $115 per share."
Vornado's offer ensures the overall value of its bid remains $56 per share as long as the Vornado share price remains between $115 and $135.
Shareholder Vote Soon
A special meeting of Equity Office shareholders to vote on the Blackstone deal remains scheduled for Feb. 5 and completion of the deal is expected on or about Feb. 8, subject to shareholder approval.
"I am puzzled at the assertion that Blackstone's $54 offer is better than Vornado's $56," said Martin Cohen, co-chief executive of asset manager Cohen & Steers, which controls about 8% of Equity Office stock.
"I think Vornado's offer assures shareholders that they will get no less than $56, and also have a call on the upside of Vornado's stock. Why would I accept $54?" added Cohen.
A Vornado spokeswoman confirmed that Starwood Capital Group Global and Walton Street Capital were no longer part of Vornado's bid. The previous Vornado bid, which included Starwood and Walton Street, was $21.6 billion, or $52 a share.
However, Vornado said it was in discussions to sell up to $10 billion of Equity Office assets to Starwood Capital and Walton Street Capital, and to sell an additional $10 billion of Equity Office assets within the first year of the closing of its deal.
Blackstone would receive a $500 million breakup fee if Equity Office terminated their agreement. Equity Office was not immediately available for comment.
"I don't remember a time in the near past where you've had such a high-profile battle between a private equity firm and a public firm -- these public firms are fighting back," said Shawn Campbell, principal with Campbell Asset Management, which sold its Equity Office shares after the initial Blackstone bid.
Under Vornado's new offer, each Equity Office share would convert into $31 in cash and Vornado common shares having a value equal to $25.
Vornado said its offer allowed Equity Office to continue to pay its regular quarterly dividends at the rate of 33 cents per share and includes pro rata dividends to the closing.
Vornado expects the acquisition to boost its funds from operations per share beginning in 2008.
"The fact that this is not going to be accretive until 2008 just demonstrates that moving higher at this point is just making it tighter," Campbell said. "It's getting much more difficult to justify this deal."
Vornado said it has obtained up to $30.5 billion of debt finance commitment from Lehman Brothers, JP Morgan, Barclays Capital, RBS Greenwich Capital and UBS.