As GlobeSt.com reported this morning, Vornado pulled its higher bid--$56 per share--concluding that "the premium it would have to pay to top Blackstone's latest bid, protected by a twice-increased breakup fee, would not be in its shareholders' interest."

Blackstone will probably be selling off more of EOP's properties than expected, because of the price Blackstone ended up paying after the bidding war, said Richard Kincaid, president and chief executive officer of EOP, at a press conference following the vote. "They may need to mark up the assets more than they planned," Kincaid said. A Blackstone official did not return a phone call for comment. Kincaid said because the national office market is doing well, Blackstone can raise rents on various properties. However, he said because Chicago is not following that positive trend yet, with about 13% vacancy, rents will stay the same but incentives will disappear.

On Sunday, Vornado had offered to push more cash to the front of the deal, forcing Blackstone to hike its bid on Monday to $39 billion in cash, still under the higher Vornado offer. Not surprisingly, a Blackstone spokesman had said the company's offer was "superior " and that the Vornado deal was "risky." Vornado responded Sunday night with a revised tender offer for a minimum of 51% of EOP's shares for $56 per share in cash, and the rest in Vornado shares if the tender was oversubscribed. The offer included more upfront cash.

Blackstone had originally offered $48.50 per share for EOP, and then a partnership led by Vornado offered $52 per share, but with conditions. That partnership, Dove Parent LLC, was made up of Vornado, Starwood Capital and Chicago-based Walton Street EOP.

Blackstone countered with $54 per share, and Starwood and Walton Street dropped out at the same time that Vornado made another counteroffer for $56 per share. "There were many interesting tactics and strategies going back and forth," Kincaid said. "Vornado's deal had a high hurdle, with the stock and the months-long delay for the deal to close. It just ended up that Blackstone ended up the day."

Officials at EOP said the Blackstone's amended offer of $55.50 per share, which worked out to be about $39 billion, will close by Feb. 9. The deal includes taking on about $16 billion in EOP debt. EOP has a total office portfolio consisting of whole or partial interests in 580 buildings comprising 108.6 million sf in 16 states and the District of Columbia.

Kincaid, who helped found EOP and has been with the company 16 years, says that he will now take some time off, but then plans on starting a new real estate firm. "You will see us again in Chicago," Kincaid says, adding that he hopes to bring onboard a few people from EOP to his new company. "The company will be private, and deal with more property types than just office. We'll be more opportunistic." He says he's going to be employed at EOP a little longer; he meets with Blackstone officials here in Chicago on Monday.

He says Blackstone, or any buyers of EOP's properties, will likely keep on much of the company's building management employees. "We know that Blackstone wanted to hold onto some properties in Chicago, we're hopeful that they can keep an operational base here." About 600 people work for EOP in Chicago, with 2,100 total employees in the company.

Instant Insights /

EOP Votes in Field of One for Blackstone's Buy-Out

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