Starwood Capital Group LLC, TDR Capital LLP and Terra Firma Capital Partners Ltd. have another two weeks to make an offer for IWG Plc, the serviced-office company that owns the Regus brand. A fourth bidder, Prime Opportunities Investment Group LLC, was excluded.
IWG in a statement on Saturday – original deadline for firm bids – said “having considered the proposals received and based on discussions to date,” it was seeking an extension to Aug. 7 from the U.K. Panel on Takeovers and Mergers. IWG said the extension excluded Prime Opportunities.
Private-equity companies including Blackstone Group LP and Carlyle Group LP are acquiring co-working and serviced offices as companies seek greater flexibility and shorter leases. The growth of WeWork Cos., the flexible office company backed by SoftBank Group Corp. that has become one of the world’s most valuable start-ups with a $20 billion valuation, underlines the rewards on offer for catching that shift in demand.
IWG’s biggest shareholder is Mark Dixon, the company’s chief executive officer and the founder of Regus, who owns about a quarter of the stock.
IWG is spending heavily on the expansion of its network, adding the equivalent of more than twice the office space at One World Trade Center to its portfolio this year. The cost of the additional space, together with a disappointing performance from IWG’s U.K. operations, are hurting its earnings. Indeed, the prospects for organic growth are “grim,” Green Street Advisors analyst Hemant Kotak said in a report Thursday.
However, private-equity firms are betting that by removing the company from the short-term scrutiny of public ownership, the investments will eventually prove lucrative. New locations typically take several years to achieve full profitability.
IWG shares have climbed more than 30 percent since May 10, the day before the Zug, Switzerland-based company disclosed that potential bidders had approached the company. IWG has a market value of 2.7 billion pounds ($3.5 billion).