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. Last Updated: 07/27/2016

A $2.4Bln Bid for Canary Wharf

LONDON -- Investment banks Morgan Stanley and Goldman Sachs teamed up with Canary Wharf's biggest shareholder Monday in a possible ?1.5 billion ($2.4 billion) bid for the owner of Britain's tallest building.

Canary Wharf, which has turned derelict docklands in the east of London into a new, soaring financial district, has been at the center of takeover speculation since it announced in June that it had received several approaches.

Morgan Stanley and Goldman Sachs, previously seen as opponents in a bid battle, issued a statement Monday confirming a weekend report that they would work together on a possible offer.

Their property funds are teaming up with New York-based private investor Simon Glick, who owns 14.5 percent of Canary Wharf stock. Sources familiar with the approach have said the offer is likely to be pitched at up to ?1.6 billion in cash.

Canadian conglomerate Brascan Corp, one of Manhattan's largest landlords, and Paul Reichmann, Canary Wharf's founder and chairman, could also participate in any auction.

Brascan has built up a near 10 percent stake in Canary Wharf.

The firm, named after a dockyard that once handled bananas imported from the Canary Islands, has net debt of 3.4 billion pounds.

Analysts said they saw two bidders in the end -- the Morgan-Goldman-Glick combine, which could possibly rope in Reichmann, and Brascan.

"The first is the one we need to take seriously. I can't believe the second bid will be with substantial backing because Brascan is not big enough to support a bid by itself," HSBC analyst Alan Patterson said.

The dwindling number of bidders could be bad news for Canary Wharf's other shareholders.

"The more people that want to pull out individually, the lower the bid we'll see," said Patterson.

J.P. Morgan analyst Andrew Penny said he expects the bid price to be below the firm's current share price, citing limited cash flows in its business and the poor state of the commercial property market.

Canary Wharf has suffered along with many other commercial property companies as the global economic slowdown has hit many of its occupants in the banking sector.

But it owns real estate that rivals covet.

Its tenants include banking heavyweights Citigroup and HSBC and Morgan Stanley, which it lured away from London's traditional finance district, the City, to its docklands site, which is dominated by an 800-foot tower.

Canary Wharf fell into difficulty after the 1987 stock market crash and had to be bailed out by a group of banks.