Canary deal 'difficult' says broker

IT IS a unique 'mini-City' of soaring glass and steel skyscrapers. But those hoping for a bidding war for London Docklands development Canary Wharf could be disappointed.

Broker Merrill Lynch thinks an offer will be difficult to finance and sees 'a significant risk that no bid materialises'. It estimates a 275p to 300p range for any offer, valuing CW at £1.6bn to £1.76bn.

Prospects of a three-way auction suffered a blow when interested parties Morgan Stanley and Goldman Sachs joined forces. The only other serious contender is Canadian conglomerate Brascan, which has 10%.

Goldman and Morgan are backed by CW's biggest shareholder Simon Glick, with 14.5%. They are in talks with CW chairman and founder Paul Reichmann, with 7.75%. Morgan is CW's former adviser, making the contest look one-sided.

CW sources said: 'This was never going to be a Safeway, with five or six possible bidders. We are very happy that there are two bids rather than one.'

The rent from CW's skyscrapers has been mortgaged to the hilt, sucking out cash and making it difficult for potential buyers to raise funds. Buyers would need to find £1bn, and to believe in an eventual upturn in the property market, Merrill said.

UK property groups seem reluctant to enter the fray. One chief executive said: 'CW is a financial play, not a property play. All the current income is the long-term property of the bondholders.'

CW has some superb assets, but is difficult to value. The value of any tax breaks is murky. The group was floated in 1999 at 330p, valuing it at £2.2bn.

Analysts query why owners should have sold shares to outside investors when the market was improving, and why they should be buying them back when the market is going down.