(Bloomberg) — Prologis Inc., the giant global warehouse owner, unveiled a roughly $24 billion all-stock offer to acquire Duke Realty Corp., taking its bid public after months of private pushback from the Indianapolis-based real estate investment trust.
The proposal values Duke at $61.68 a share, a 29% premium to its closing price on May 9, according to a letter from Prologis Chief Executive Officer Hamid Moghadam to Duke made public on Tuesday. Duke investors would own 19% of the combined company.
Duke shares were up 10% to $52.46 at 10:52 a.m. in New York. Prologis stock was down 2.9%. A representative for Duke declined comment.
The bid for Duke, which owns about 165 million square feet (15.3 million square meters) of industrial real estate in the US, comes amid a boom in warehouse demand driven by the ongoing shift to e-commerce. The US vacancy rate fell to 3.4% in the first three months of this year even as developers rushed to build new logistics properties, according to Jones Lang LaSalle Inc.
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While Amazon.com Inc. said last month that it had overbuilt its logistics network, landlords see persistent demand for new properties. The tight market for space, meanwhile, is pushing up rents, increasing the logic for mergers.
“The offer reflects that warehouse rent growth has continued to exceed expectations,” Bloomberg Intelligence analyst Lindsay Dutch said in an interview. “M&A gives you quick expansion and exposure to rising rents, compared to the time it takes to build new warehouses.”
If accepted, the Duke proposal would mark a return to dealmaking for Prologis, which acquired DCT Industrial Trust in 2018 and Liberty Property Trust in 2020. Moghadam’s firm has relied on new development to expand its holdings over the past two years, boosting its US portfolio to more than 600 million square feet — roughly 200 million square feet more than its closest competitor, Blackstone Inc., had at the end of June.
San Francisco-based Prologis cited those deals in its letter and called its track record as an acquirer “incredibly strong,” with recent purchases materially benefiting investors.
Prologis first approached Duke about a potential combination in November, according to the letter. After Duke spurned a series of offers, Moghadam concluded “that a public approach may be more constructive.”
Duke’s industrial holdings are “highly strategic” and “complimentary” to Prologis’s own portfolio of logistics assets, according to the letter. Moghadam said the deal would add to Prologis’s earnings and benefit shareholders of both companies.
What Bloomberg Intelligence Says
“Prologis’ proposal to buy smaller, U.S.-exclusive Duke Realty reignites an acquisition streak that’s been dormant since early 2020 and offers rapid expansion amid strong warehouse rent growth.”
— Lindsay Dutch, BI industry analyst
(Updates with analyst commentary, share trading.)
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