BETWEEN REGUS AND HQ PUT ON HOLD:
|Regus bid is put on hold
By Norma Cohen, Property Correspondent
Published: June 4 2001 19:50GMT | Last Updated: June 5 2001 19:32GMT
Hopes of an all-paper acquisition by serviced offices provider Regus of its US competitor HQ Global Workplaces have been derailed after confirmation of talks triggered a sharp fall in the UK-based group's share price on Monday.
Mark Dixon, chief executive and owner of 61 per cent of Regus, is understood to be reluctant to issue new shares substantially below the price at flotation. "The key is that we are not going to overpay," he said.
The talks have now been called off, at least for the time being. Regus's shares fell to a post-float low of 203½p by the close of trading on Monday, from 239p on Friday.
The company launched an initial public offering in November at 260p and the shares peaked this year at 392p. The company's market capitalisation has fallen to £1.2bn from £2.1bn ($3bn).
It is thought that the all-paper deal that has been under discussion would value HQ Global, and its majority shareholder, Frontline Capital Group, at £800m-£850m, including the assumption of debt.
Regus and HQ Global are understood to have held talks about an acquisition since late last year. But the fall in Regus's share price earlier this year led to a halt. The recent recovery of its share price allowed talks to resume until Monday.
Frontline Capital is facing pressure from shareholders, with its shares hovering around $5 per share, down from over $60 per share at the height of the internet boom.
Frontline was spun off from Reckson Associates, a US real estate investment trust. It has said it is hopeful it can complete a restructuring of its business by the end of the second quarter at the end of June.
HQ Global has recently indicated to analysts that based on current trends in its business, it may soon be in violation of certain financial covenants, believed to relate to its bank debt.
It is not clear whether Frontline will seek another buyer if it cannot conclude a deal ith Regus. One possible alternative buyer for Frontline and HQ Global is Equity Office Property, the largest US offices company.
Equity Office Property - which already has a stake in HQ Global - has consistently declined to comment on whether it would be interested in acquiring the company, except to say it is interested in offering flexible accommodation.
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