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Vornado Offers Equity Office Shareholders Alternative Deal

Vornado Realty Trust moved on Sunday to make its $23.2 billion bid for top U.S. office landlord Equity Office Properties Trust more attractive by offering to pay the cash portion up front.

Vornado said it was addressing concerns the EOP board had raised about the "speed and certainty" of its offer.

Equity Office said on Friday it preferred a $22.4 billion, or $54-per-share cash offer from private equity firm Blackstone Group because it believed it had "certainty of value and virtual certainty of closing in the immediate future."

Equity Office previously said it was advised that it could take four to six months to close the Vornado proposal because of the need for a Vornado shareholder vote and the potential for review by the U.S. Securities and Exchange Commission. In contrast, Blackstone's offer could close within a week.

While Vornado's new proposal does not increase the amount it offers to pay, it offers a shortened timeframe to receive a majority of the consideration, Vornado said in a press release.

Vornado said there was no SEC pre-clearance or shareholder vote requirement for cash tender offers, so the deal could be completed quickly. Vornado's new proposal is for an up front tender offer to buy up to 55% of EOP's shares for $56 per share in cash and then a follow-on merger.

The tender offer would commence about three weeks after EOP signs the merger agreement -- and would close 20 business days later, Vornado said.

Vornado said that under this proposal, the time needed to close the deal would be short and certain. It estimated about 3-½ months from signing to the closing. Vornado said its existing offer also remains open.

The board of Equity Office will review the alternative proposal by Vornado in due course, a spokesman for EOP said on Sunday.

Blackstone said its offer remained "clear, certain and scheduled to close on Friday," as it criticized the new proposal from Vornado. "Vornado has had plenty of time to either increase its price or reduce optionality and uncertainty," an emailed statement read. "It has done neither.
All of the very real closing risks that were part of VNO's original offer remain."

"This new 45 percent back-ended stock offer still has the requirement of a VNO shareholder vote and the potential of a SEC review, which would further delay the closing of the transaction," the statement read.

Including debt, Blackstone's offer is valued at $38.3 billion, which would make it one of the biggest leveraged buyouts ever. Vornado's offer has a total value of $41 billion, including debt and "all potential transaction costs."

Blackstone would receive a $500 million breakup fee if a rival bidder wins.

The competing offers for Equity Office represent the largest-ever battle for a real estate investment trust and one that involves big personalities in the real estate and private equity industries.

Equity Office was founded more than 30 years ago by real estate magnate Sam Zell. Vornado's offer pitched its chief executive, Steven Roth, up against Blackstone CEO Stephen Schwarzman, whose private equity firm has played a central role in a wave of real estate deals.

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