DTZ picks Australia's UGL as preferred bidder

International property broker DTZ said on Tuesday it has selected Australian listed property services firm UGL as its preferred bidder.

UGL, which is also active in Asia, North America and the Middle East but not in Europe, is required to make a firm offer for DTZ by no later than 5 pm on 6 December 2011. There is no certainty that an offer will be made, the London-based company added. DTZ has debt of £106 mln and cash reserves of £42 mln. Around £28 mln of debt matures next year.

A potential combination of DTZ and Sydney-based UGL would create one of the world's largest real estate services operations, with combined revenues of £1.2 bn, the third highest in the real estate services industry globally, after CBRE and JLL and ahead of C&W. The combine would have 225 offices and operate in 45 countries.

'The key strategic benefit would be the bringing together of DTZ's business scale in Europe, Middle East and Asia Pacific with UGL's end to end corporate real estate and facilities management services to corporations, governments and institutions in Australia, New Zealand, North America and the Middle East,' DTZ said.

DTZ saw its shares plummet by nearly 90% to 2.37 pence on Monday morning after it said that the preliminary takeover bids received offer 'minimal value'. The London-listed broker said it was 'evaluating preliminary expressions of interest' but added that, because of its level of debt, the bids received do not attribute value to its shares.

Shares in DTZ, which closed at 21.25 pence on Friday, dropped to historic lows below 3 pence a share shortly after the announcement. The stock opened higher on Tuesday to trade at around 3.75 pence by late morning compared with Monday's closing price of 2.85 pence.

The broker started a formal sale process on October 19 after the collapse of negotiations with a consortium of its majority shareholder St. George Participations and French real estate group BNP Paribas. Oriel Securities is advising on the sale.