Is It Time To Cash In On Canary Wharf Owner Songbird Estates plc?

Yesterday’s announcement from Songbird Estates (LSE: SBD) that someone wants to buy the company is enough to get the old pulse racing — especially if we happen to own some of the firm’s shares already.

Up goes the share price

Naturally, the share price is well up on the news that Qatar Investment Authority and Brookfield Property Partners L.P. have formulated an offer for the Company. Today’s swift rejection of what Songbird Estates reveals as a 295p-per-share proposal hasn’t reversed the spike up … yet. No doubt, investors anticipate a higher offer.

So what do we do as shareholders in a situation like this? For me, the answer is simple; I’d sell quick sharp to lock in the unexpected gain, invoking my back up rule of thumb: the faster the rise, the faster the sale.

The trouble is that there are no guarantees that the sale will go through. Indeed, last time I came across the Qatar Investment Authority, earlier this year, they were mooted as candidates for a pitch at J Sainsbury (LSE: SBRY). In that case, Qatar already held 26% of Sainsbury’s shares and had made an offer for the firm before, so the rumours had some substance — we’re still waiting for that deal to materialise.

Yet it’s the same in any potential takeover pitch, the outcome is always uncertain, and we tend to find the stock market’s ability to predict the eventual sale valuation is often pretty accurate. Investors could already be seeing the full takeover premium built in to the share price.

If we sell now and the deal doesn’t go through, we can always buy back into Songbird Estates when the shares retrace the recent rise — that’s a double gain, rather than a lost opportunity to profit if we simply hold on.

Why is Songbird Estates attractive?

The firm’s main activity is integrated property development, investment and management primarily at Canary Wharf and more recently expanding into the City and central London. Qatar has long been on the hunt for prime British firms and property, so what better investment than such an iconic London property and business than Canary Wharf. Perhaps you saw the pitch coming. After all, Qatar Investment Authority owns just under 29% of the firm already, a similar situation as with Sainsbury.

We’ll find out soon enough whether Qatar Investment Authority and Brookfield Property Partners L.P. wish to increase the money on the table.

Assets fully valued

Yesterday, Songbird’s share price moved from 260p to 320p. That compares well to the firm’s last-reported net asset value per share of 319p, suggesting that full value is now realised for investors. Perhaps you know something I don’t, but that price is good enough for me.

The possibility of a takeover approach, and the premium such an action can produce for existing investors, is another incentive to hold quality companies in our share portfolios. If a business is attractive to us, there’s a good chance it’s attractive to others, too.

Prime London property is attractive, but there are many great opportunities on the London stock market, and I'm pleased to have a new exclusive wealth report from the Motley Fool to help me find them.

The paper signposts some top-notch investment opportunities available right now, ripe for your own analysis.

This report highlights a pharmaceutical play expected to deliver a compound annual growth rate in earnings of 10% over the next five years. There's also a top-notch example of a company with great management, consistent returns on capital and predictable sales.

The shares of such firms, when held for the long term, can make people rich. You can run your analysis over these opportunities now; it's free and without obligation. Click here

Kevin Godbold has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.