APG and Goodman consider bid for Prologis European Properties

Dutch pension fund APG and Goodman Group are considering making an offer together with a group of like-minded investors to acquire for cash 100% of the ordinary units in ProLogis European Properties (PEPR). Under terms of the indicative proposal, PEPR's management rights would be transferred from ProLogis to Goodman.

In a press statement, APG and Goodman said the proposed offer of EUR 6 per ordinary unit would provide 'a compelling value proposition' for all unitholders that would close the persistent gap between PEPR’s trading price and its underlying NAV. 'It would produce demonstrable value and certainty of cash exit for all PEPR unitholders. In addition, the Proposed Transaction would resolve widely held concerns regarding PEPR’s strategy and governance structure.'

APG and Goodman claim the offer represents a premium of approximately 20% over the 11 April 2011 closing unit price; a premium of approximately 25% over the six month volume weighted average unit price; and the approximate midpoint of PEPR’s IFRS NAV and EPRA NAV as at 31 December 2010.

However, the proposed transaction cannot be executed without ProLogis' support and thus far the Amsterdam-based company has rejected the initiative.

APG and Goodman said they expected that the directors of ProLogis Management Sarl and the Independent Directors of the board of PEPR, will 'recognise their duty to act in the best interest of the PEPR unitholders'. Both ABP and Goodman are willing to consider alternative transaction structures if suggested by ProLogis, should such structures provide better value to unitholders than the current Proposed Transaction.

Were the transaction to proceed as planned, funding would be provided by APG, Goodman and a group of like-minded major pension and sovereign wealth funds who have expressed a willingness to participate, the two companies said. They claim the proposed deal would also mitigate concerns that have arisen in respect of the additional conflicts of interest that will result from the proposed merger of ProLogis and AMB. Following this merger, and taking into account the recently announced joint venture between AMB and Allianz, there would be a total of five ProLogis/AMB vehicles that invest in core European logistics assets and may therefore be competing for the same business opportunities in the same territory.

It is currently envisaged that upon a successful transaction APG and Goodman would each hold a circa 25% interest in the privatised entity with the balance of the equity provided by other members of the consortium, all of whom are leading global real estate investors.

Patrick Kanters, Managing Director Global Real Estate at APG stated: 'As manager of its clients’ assets, APG has the obligation to its clients to maximize the value of the investments we manage on their behalf. Ever since PEPR’s IPO we have repeatedly called upon the ProLogis and PEPR management to address PEPR’s governance and strategy issues, to try and close the persistent gap between PEPR’s unit price and underlying NAV, but to no avail. With this proposed transaction APG is seeking to deliver value for all unitholders.'

Greg Goodman, CEO of Goodman stated: 'We look forward to working alongside our Consortium partners to deliver value for all unitholders in PEPR. The geographic location of PEPR’s portfolio is complementary to our existing European footprint. Our experience of managing assets across these markets is a key factor behind our participation both as an investor in the Consortium and as its operational and strategic partner.'

Goodman has indicated its willingness to act as operational partner to the consortium and to discuss fair cash compensation with ProLogis for relinquishing its rights as manager of PEPR.

Macquarie Capital Advisers is acting as financial adviser to APG, Goodman and the consortium.

Following the joint press release, Prologis European Properties issued a statement saying that it has not been contacted by the Investor Group or 'any other pension or sovereign wealth fund in relation to any offer to acquire ordinary units in PEPR'.

Click on the link below to read: 'Prologis vows to retain PEPR stake'