Prologis acquires Duke Realty for $26 billion
The deal is expected to provide $310-370 million in immediate accretion from corporate general and administrative expense reductions and operational leverage, as well as mark-to-market adjustments on leases and debt
Prologis, a global leader in logistics real estate, announces a definitive merger agreement to acquire Duke Realty Corporation, which owns and operates approximately 164.9 million rentable square feet of industrial assets in 19 major logistics markets, in an all-stock transaction valued at approximately $26 billion, including debt assumption.
The announcement comes after Duke Realty rejected Prologis' almost $24 billion takeover offer in May, calling it inadequate.
The deal has been authorised unanimously by the boards of directors of Prologis and Duke Realty.
"We have admired the disciplined repositioning strategy the Duke Realty team has completed over the last decade," said Hamid R. Moghadam, Co-founder, CEO and Chairman, Prologis. "They have built an exceptional portfolio in the U.S. located in geographies we believe will outperform in the future. That will be fueled by Prologis' proven track record as a value creator in the logistics space. We have a diverse model that allows us to deliver even more value to customers."
Prologis gains high-quality properties for its portfolio in key regions like Southern California, New Jersey, South Florida, Chicago, Dallas, and Atlanta as a result of the purchase.
The owned and controlled transaction includes 153 million square feet of functioning properties in 19 key U.S. logistics locations, nearly 11 million square feet of construction, with a total investment of around $1.6 billion and 1,228 acres of land owned and under option with a build-out of approximately 21 million square feet.
Prologis plans to hold approximately 94% of the Duke Realty assets and exit one market.
"This transaction is a testament to Duke Realty's world-class portfolio of industrial properties, long-proven success and sustainable value creation we've delivered over the years," said Jim Connor, Chairman and CEO, Duke Realty. "We have always respected Prologis, and after a deliberate and comprehensive evaluation of the transaction and the improved offer, we are excited to bring together our two complementary businesses. Together, we will be able to accelerate the potential of our business and better serve tenants and partners. We are confident that this transaction – including the meaningful opportunity it provides for shareholders to participate in the growth and upside from the combined portfolio — is in the best long-term interest of Duke Realty shareholders."
The deal is expected to provide $310-370 million in immediate accretion from corporate general and administrative expense reductions and operational leverage, as well as mark-to-market adjustments on leases and debt. The deal is estimated to improve annual core funds from operations (Core FFO) per share by $0.20-0.25 in year one. The purchase is projected to be profits neutral in year one on a Core AFFO basis, excluding promotions.
Additionally, future synergies have the potential to generate $375-400 million in annual earnings and value creation, including $70-90 million in incremental property cash flow and Essentials income, $5-10 million in cost of capital savings, and $300 million in incremental development value creation.
"This transaction increases the strength, size and diversification of our balance sheet while expanding the opportunity for Prologis to apply innovation to drive long-term growth," said Tim Arndt, chief financial officer, Prologis. "In addition to generating significant synergies, the combination of these portfolios will help us deliver more services to our customers and drive incremental long-term earnings growth."
Duke Realty stockholders will get 0.475x of Prologis shares for each Duke Realty share they possess, according to the terms of the transaction. The acquisition is projected to conclude in the fourth quarter of 2022, subject to shareholder approval from Prologis and Duke Realty, as well as other usual closing conditions.
As of March 31, 2022,Prologis owned or had investments in, on a wholly owned basis or through co-investment ventures, properties and development projects expected to total approximately 1.0 billion square feet (93 million square metres) in 19 countries. Prologis leases modern logistics facilities to a diverse base of approximately 5,800 customers principally across two major categories: business-to-business and retail/online fulfilment.