June 4, 2001
Web Posted at 1256 GMT

LONDON, June 4 (Reuters) - Britain's Regus Plc, which rents out serviced office space, said on Monday it was in talks about a possible all-share bid for its main international rival, U.S.-based HQ Global, sending Regus stock tumbling 12 percent.

Shares in Regus sank to 209 pence, just above its all-time low, after it said any deal would be structured as an all-paper purchase of HQ's majority shareholder, Nasdaq-listed Frontline Capital Group, as well as minority interests in HQ.

Frontline, with a market value of $150 million, owns about 56 percent of HQ, the leading U.S. provider of serviced office space. Late last year, in a move perceived as hanging out a “for sale” sign, it said it wanted to maximise HQ's intrinsic value.

Regus declined to put a value on the HQ business but the price has been estimated at around $650 million, including the minority interests and securities convertible into HQ stock.

One analyst who declined to be identified said a deal was not expected to hand a large premium to the owners of HQ.

Minority shareholders in HQ include CarrAmerica Realty Corp and Equity Office Properties Trust.

HQ Global has about 65,000 customers in over 460 locations in 19 countries. It has 2,500 staff and was created in mid-2000 out of the merger of Frontline Capital subsidiary Vantas Inc and HQ Global Workplaces Inc, an affiliate of CarrAmerica.

Regus, which floated on the London market last October and is by far the larger firm by market value, said no deal had been reached. Regus priced its initial offer at 260p.

The stock, which touched its life low of 205p this month, has a market value of around 1.2 billion pounds. Regus has outperformed Frontline by almost 80 percent since Regus listed.

“No agreement or understanding has yet been reached between the parties,” Regus said in a brief statement.

“If a transaction were to proceed, it would require, inter alia, the consent of a substantial number of parties and would be subject to a number of conditions. There can, therefore, be no assurance that current discussions will result in a transaction between the parties,” it added.

Regus runs a network of over 300 centres in about 50 countries offering fully equipped office space. Its initial share offer raised 235 million pounds, including 100 million earmarked for retiring debt.