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LONDON-Shares in Canary Wharf Group rose by more than 9% in early trading following speculation that U.S investment bank Goldman Sachs is set to join a bidding war for UK’s largest property company.

The story in this morning’s Financial Times came at a time when bid speculation about Canary Wharf had gone quiet. But now this has been revived with the newspaper report that Whitehall Funds, the property investment arm of Goldman Sachs, is to submit a final offer for Canary Wharf by the 28 August.

U.S. investment bank Morgan Stanley confirmed in June it had made a bid approach and the other potential bidder – Canada’s Brascan Corp – has built up a stake of nearly 10% in Canary Wharf and is understood to have appointed Deutsche Bank and Merrill Lynch to advise on a possible bid. Some analysts are also expecting Canary Wharf board to seek a management buy-out and take the company private.

Although the Financial Times story is speculative the City is giving some credence to it. By 0745 GMT shares in Canary Wharf were up 10.2% at 260p giving the company a stock market value of £1.5 billion pounds ($2.4 billion) compared with net debts of £3.4 billion ($5.4billion). But by 12.30 GMT the shares had eased back slightly to 258p, still up 9.3% on the day.

Canary Wharf, which has turned derelict land on the River Thames into a second financial district to rival the City, has struggled along with other property companies from rising vacancy rates and downward pressure on rents. The global economic downturn has hit financial services tenants hard and it is this sector that forms the core of the tenant base of Canary Wharf. High profile occupiers include banking heavyweights Citigroup, HSBC and Morgan Stanley, which the company lured away from London’s traditional finance district to Docklands.

Despite the poor state of the office market, Canary Wharf has property assets that others covet. Not only does it have some of the most prestigious tenants in London, it also some of the finest office blocks with the largest floor plates available in the capital. The Jubilee Line extension out to Docklands has also dramatically improved access. But more importantly there is considerable tracts of derelict land around Canary Wharf for expansion.

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