Prologis has intensified its pursuit of Segro after the London-based logistics warehouse operator rejected a £12.6 billion ($16.6 billion) takeover bid last week. Prologis further outlined its financial and strategic thesis for the combination on Tuesday.
The San Francisco-based real estate investment trust said the all-stock transaction would unlock significant value for Segro (LSE.SGRO) shareholders beyond the initial 25% premium to share price. (Segro shareholders would receive .084 new Prologis shares for each share held and hold approximately 10.5% of Prologis’ share capital after closing.)
Prologis (NYSE: PLD) said the deal gives Segro access to its larger logistics real estate network and its “fortress balance sheet.” In addition to “lagging earnings and dividend growth,” Prologis claims Segro trades at a discount because it is forced to lean on dilutive equity issuances to raise funds.
“Prologis’ access to public and private capital that will enable Prologis to unlock and accelerate the embedded value of SEGRO’s development and data center pipeline which Prologis believes SEGRO is unable to fully realize on a standalone basis given its balance sheet capacity and persistent trading discount,” the company said in a news release.
It said Segro has seen total shareholder returns decline by 20.1% over the past five years, while Prologis generated a 38.6% return.
The combination would increase scale across the U.K. and Europe, more than tripling Segro’s European footprint to 363 million square feet, and giving it a nearly 3,000-acre land bank for future development projects.
Prologis also touted its dedicated data center and energy teams, which it said will allow Segro to better monetize its existing data center pipeline.
The deal would mark Prologis’ biggest transaction since it acquired Duke Realty for $26 billion in 2022.
Segro continued to push back on the transaction on Tuesday, claiming the offer was “inadequate, opportunistic and one-sided.”
“Prologis is trying to acquire SEGRO on the cheap when our share price has been dislocated by the Middle East conflict and at a price that reflects none of the quality, scarcity and growth embedded in the business,” said Andy Harrison, chairman of Segro. “We have unanimously rejected their Proposal because we continue to believe our compelling standalone investment case can deliver superior shareholder value. Capital is not a constraint on our ability to unlock all of this value for our shareholders.”
Shares of PLD were down 2.2% at 10:24 a.m. EDT on Tuesday. Shares of SGRO were up 7.8%.
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