Committee Rejects Offer as Part of $36B Buy

The acquisition deal includes about $8.4 billion in bond debt, which includes many senior notes that will be made whole in the deal. New York-based Paul, Weiss, Rifkind, Wharton & Garrison LLP represents the 15-member committee, which includes institutions that hold several billion dollars in EOP bonds, according to attorney Andrew Rosenberg. He says that tender holders of 7.875% notes due in 2031, 7.5% notes due in 2029 and 7.25% notes due in 2028 will not receive fair compensation for their investment.

These three long series of bonds will receive $160 million less than what their contracts say, Rosenberg said in committee conference call before the consent vote Jan. 5. He says the merging companies should not be allowed to get away with paying less on the notes. "This type of coercive consent is bad for the REIT market overall," he says.

He says that the committee distributed a form of "No Consent" Agreement to more than 80 interested holders, and has received executed forms of that agreement from the holders of the majority amount of notes of outstanding principal amounts under each of the 1997 indenture and 2000 indenture. The majority has agreed to not tender the notes subject to the Blackstone merger agreement, Rosenberg says.

He could not be reached for comment after the consent vote. However, EOP officials said in a statement the afternoon of Jan. 8 that the company has not received "no consent" agreements from the committee. "Equity Office has no evidence to suggest that it will or will not timely receive the required consents," said the company in the statement. Those note holders wanting to receive full, pre-deadline consideration may tender by 5 p.m. Eastern Time Jan. 9, or to receive the basic tender consideration should tender by 8 a.m. Eastern Time Feb. 8.Representatives of Blackstone and EOP also did not return calls for comment, though both companies have said that the best price was reached for the merger and that the lawsuits will be vigorously defended. Richard D. Kincaid, chief executive officer of EOP, has said that the offer was in the best interest of the shareholders. "When you do a deal this size, there's going to be a myriad of reactions," he said.

The EOP shareholder meeting to approve the merger agreement will be held at 8:30 a.m. Monday, Feb. 5 at the company's offices at One North Franklin St. in Chicago. As of Sept. 30, the company had a national office portfolio of whole or partial interests in 585 office buildings in 16 states and the District of Columbia.