Prologue offers to buy Duke Realty in a nearly $24 billion deal

Prologue Inc.,

PLD -5.26%

owner of the world’s largest warehouse space, said they recommend buying

Duke Realty Corp.

DRE 3.92%

in a nearly $24 billion deal, a vote of confidence in the e-commerce business at a time when investors are nervous about its growth.

Prologis controls the 1 billion square foot world warehouse network and distribution centers, including facilities used by retail and logistics companies, such as Inc.,

Home Depot Inc.


FedEx Corp.

The company said on Tuesday it made an unsolicited $23.7 billion all-stock offer to Duke after more than five months of trying to convince the company to enter into private negotiations. .

“Many private conversations have not resulted in dialogue or serious consideration,” Prologis CEO Hamid Moghadam said in a letter to James Connor, Duke’s chief executive officer.

Prologis’ offer of $61.68 per share represents a 29% premium to Duke’s closing price on May 9.

Duke, which owns about 160 million square feet of industrial real estate in 19 major US logistics markets, did not respond to a request for comment.

Mr. Moghadam’s letter said that in private communication, Duke “considered that the premium was not sufficient to engage us seriously.”

Industrial real estate is one of the best performing commercial real estate sectors in recent years due to the explosive growth of online commerce. The pandemic continues to boost the sector with people spending more time shopping at home.

But the online retail growth story was mixed in late April when Amazon reported first quarter loss for seven years because of inflation, supply chain disruptions and other problems. Tech stocks have plummeted in recent weeks, sending the Nasdaq Composite Index down about 25% this year.

Shares of industrial real estate companies like Prologis and Duke also fell after Amazon posted quarterly losses. Amazon CEO Andy Jassy stunned the industry when he said that the company “no longer pursues physical or human capacity”.

Analysts also question whether the growth in demand for industrial spaces is sustainable given the market has suffered from overcapacity in the past.

Michael Goldsmith, an analyst at UBS Investment Bank during Prologis’ first-quarter earnings call last month, asked “Is there a limit to how high industrial rents can go up. “It seems like the growth we’re going through is unprecedented.”

Mr. Moghadam said that the vacancy rate of the industrial market is only 3.5% and the market has a lot of room to operate. “There will be a saturation point,” he said. “But I really think this time is different from 20 or 30 years ago.”

Prologis has expanded its industrial footprint through acquisitions. The company acquired the Liberty Property Trust in a $13 billion deal in 2020, and DCT Industrial Trust Inc. in the amount of $8.5 billion in 2018.

Prologis is not the only major investor buying industrial property rights.

Slat Inc.,

one of the world’s largest owners of commercial real estate, has also bet heavily on this sector.

This early year,

Trust in industrial logistics attributes

acquired Monmouth Real Estate Investment Group in a deal worth approximately $4 billion. Contractors for Monmouth include tycoon Sam Zell and Starwood Capital Group.

In a letter to Duke on Tuesday, Mr Moghadam said the deal would create long-term strategic benefits, despite “current market volatility”. The letter states that the value of Prologis’ offer has increased by about 10% since the larger company reached a viable deal in late November.

The offer to purchase all of Prologis shares for Duke Realty would give Duke Realty shareholders 0.466 Prologis shares for each Duke Realty share they own.

Shares of Duke rose $1.87, or 3.9%, to $49.58. Prologis dropped $6.96, or 5.3%, to $125.41.

The gap between where the stock is trading and the asking price suggests investors are skeptical Duke Realty will accept the bid, the analysts said.

Write letter for Will Feuer at [email protected]

Copyright © 2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

Source link


News7F: Update the world's latest breaking news online of the day, breaking news, politics, society today, international mainstream news .Updated news 24/7: Entertainment, the World everyday world. Hot news, images, video clips that are updated quickly and reliably

Related Articles

Back to top button