UPDATE: Vornado Partnership Raises Ante on EOP by $1.5B

The Blackstone deal is for cash to be paid for the shares, but the partnership's offer is payable 60% cash and 40% in Vornado shares, and would also offer the option for EOP shareholders to exchange their units for shares of Vornado Realty LP. Vornado said in a statement Wednesday that if the deal closed, the company would acquire and retain about half of EOP's assets in the major markets on the coasts, and the other two partners would acquire the rest of the properties. EOP has a total office portfolio consisting of whole or partial interests in 580 buildings comprising 108.6 million square feet in 16 states and the District of Columbia.

In the statement, Vornado said it will fund the acquisition by issuing $10.6 billion in value of its shares and units and the balance with debt. The company also says it would sell or co-venture certain assets as part of this purchase. The partnership had included Cerberus Capital Management, but the finance firm allegedly dropped out of the deal on Jan. 16.

A New York investor who owns EOP shares tells GlobeSt.com that shareholders are excited about the higher offer, and it should be interesting how the deals shake out. "We'll see if they can do it within the time period," says the investor, who asked not to be named.

A statement released by EOP last Wednesday night said that the company "will consider the proposal as soon as practicable." A spokeswoman tells GlobeSt.com that the board has not changed its recommendation of taking the Blackstone offer.

Blackstone has a $200-million break-up fee that it would receive if the EOP goes with another offer. A Blackstone spokesman tells GlobeSt.com that his company's deal is much more solid than the new offer. "An alternative proposal, relying on the potential issuance many months from now of more than $10 billion in stock, trading at near record prices, is inferior and carries vastly more risk than Blackstone's all cash deal closing in approximately two weeks," he says. A Vornado spokeswoman tells GlobeSt.com that it cannot comment on the Blackstone statement.

The stock price for EOP shot up to its highest point since the Blackstone merger announcement on Wednesday, hitting $51.40 a share. Richard D. Kincaid, chief executive officer of EOP, has said that a deal this size is going to incur many reactions.