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Prologis offers to buy Duke Realty for $24B

Open letter reveals failed attempts to engage in the past

Prologis looking to acquire another major real estate portfolio (Photo: Jim Allen/FreightWaves)

Logistics real estate giant Prologis announced Tuesday a proposal to acquire competitor Duke Realty in an all-stock transaction valued at $24 billion.

An offer price of $61.68 per share for Duke Realty (NYSE: DRE) represents a 29% premium to Monday’s closing price and a 32% premium based on 30-day volume weighted averages. Prologis (NYSE: PLD) said the deal “provides significant growth and upside potential” to both companies.

“We are known for providing exceptional service to customers and delivering superior value for our shareholders, including the shareholders of companies we have merged with or acquired in the past,” stated Hamid Moghadam, Prologis co-founder, chairman and CEO, in a press release. “We have no doubt that Duke Realty’s shareholders would similarly benefit from long-term value created by the combination of our companies.”

Acquisition price~$24 billion
Duke Realty annual revenue (2021)$1.1 billion (162 million square feet of space)
Prologis annual revenue (2021)$4.8 billion (1 billion square feet of space)
Acquisitions by PrologisLiberty Property Trust, DCT Industrial Trust and KTR Capital Partners
Financingcompany stock
Table: Company reports

An open letter from Moghadam to Duke counterpart James Connor shows Prologis has made several attempts to acquire the company in recent months.

“We are making this letter public after numerous private conversations have not led to serious dialogue or consideration. We believe this proposed transaction will be enthusiastically received by both your and our shareholders,” the letter stated.

“On almost every metric (current stock price, VWAPs and consensus price targets) our proposal provides Duke Realty’s shareholders with a premium at the absolute top tier of valuation, as compared to other comparable REIT transactions.”

Duke Realty shareholders would own 19% in the combined entity, which the press release said represents 26% more ownership than the percentage of total earnings Duke Realty generates.

Prologis said it made an offer at a 20% premium in late November and on May 3 a “final attempt to engage privately,” representing a 34% premium, was tendered to no avail. Duke Realty rejected the offer the same day, according to the press release.  

“Over the past five months, Duke Realty has not substantively engaged while the implied premium of Prologis’ offer has steadily increased,” the letter stated.

The proposed transaction would be executed at an exchange ratio of 0.466 shares of PLD for each Duke share outstanding. The deal would be accretive to shareholders on day one, according to Prologis.

The Duke portfolio includes 545 logistics properties (162.4 million square feet of space) in 19 different logistics markets.

A race for industrial space continues. A sustained period of high consumer demand as well as retailers holding incremental inventories to avoid supply chain disruptions have pushed the need for logistics properties to record levels. Prologis’ occupancy rate was 98.1% by the end of the first quarter. The company is forecasting U.S. market rents to increase 22% this year.

No stranger to large deals, Prologis was also recently linked as a suitor of Blackstone’s (NYSE: BX) $23 billion last-mile portfolio.

“While we would prefer to continue working privately with you, as we have with others, to reach agreement for the benefit of your shareholders and ours, this approach is clearly not working as detailed above. This led us to conclude that a public approach may be more constructive for all,” the letter said.

Goldman Sachs (NYSE: GS) is serving as financial adviser to Prologis.

Prologis Ventures is an investor in FreightWaves.

Click for more FreightWaves articles by Todd Maiden.

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Todd Maiden

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC Capital Markets and BB&T Capital Markets. Todd began his career in banking and finance before moving over to transportation equity research where he provided stock recommendations for publicly traded transportation companies.