New Vornado Bid May Not Be Enough To Land EOP


Update: CNBC's Diana Olick shed some light on why Equity Office Properties is such a hot buy. She noted that it holds commercial property in markets where business-oriented real estate is still "very solid," including New York City, Boston, San Francisco and Washington, D.C. Olick focused on the latter, where EOP holds seven office buildings -- and where the occupancy rate is an amazing 97%. (Check out Olick's blog, Realty Check.)

The Super Bowl isn't the only big-money competition people are betting on this week: second-guessers are trying to call the shots before Monday, when Equity Office Properties shareholders will vote whether to accept takeover bids from Vornado or Blackstone Group.

CNBC's David Faber deconstructed Vornado's latest offer of $56 per share, made this morning. Sure, at first glance, the sweetened bid tops Blackstone's $54 all-cash proposition, but he says "there's a good chance" Vornado's offer won't thrill EOP investors.

Why? Faber explained to the "Morning Call" crew that Vornado -- which seems to be going it alone, rather than attempting this buyout with its private-equity allies -- is dividing its offer into cash (55%) and stock (45%). (The bid is valued at some $41 billion, using Wednesday's closing price.) But the deal would probably take a whole quarter to close; and shareholders might view the value of cash as closer to a sure thing than the uncertainty of stocks -- especially in light of the Fed's declaration that inflation is easing.

Faber mused on whether Vornado is simply stalling for more time, in case Equity Office nixes its offer -- and the suitor needs more ceiling room to negotiate. Whatever the case, he calls both rival bids "rich by almost any measure."

Whichever would-be acquirer comes out on top, there is certain to be one winner: EOP director and billionaire shareholder Samuel Zell. Market observer Herb Greenberg calls Zell's sales strategy "genius," and enthuses that the savvy tycoon planned all along to "create a bidding war and get what he believes to be top dollar."