PEPR rejects Prologis' EUR 1.2b bid as 'inadequate'

Prologis European Properties (PEPR) has rejected Prologis' offer of EUR 6.10 per share as 'inadequate'. 'Based on our strategy, business plans and the quality of our portfolio, we believe that the offer does not reflect the full value potential of PEPR,' Peter Cassells, chief executive officer of PEPR noted in a press release.

Neither the independent members of the PEPR board, nor the managers intend to accept the offer in respect of their own holdings of units, he added.

Prologis' stake in PEPR has changed only marginally since the company launched a mandatory cash tender offer of EUR 6.10 per unit on April 22. In a statement on Monday to inform on the offer's progress, PEPR's parent company and largest shareholder Prologis said its stake had risen to 39% from 38.9%.

The Denver-based warehouse giant has meanwhile extended the offer until May 11. Initially it was due to expire on May 6. All other financial terms of the offer remain unchanged, the company added in a press statement late on Tuesday.

Prologis' bid was made in response to an earlier offer of EUR 6 made by Dutch pension fund giant APG and the Goodman Group of Australia.

Although the announcement by the PEPR board paves the way for a new offer by APG/Goodman, market watchers do not expect the two partners to raise their bid, as permission for due diligence has not been granted. Joel Gorsele, an analyst at independent financial group Petercam in Brussels, does not expect a new bid from Prologis either. 'They are not required to do so.'

PEPR's decision to turn against its majority shareholder and parent company, Prologis comes as a surprise but should be perceived positively, Gorsele said. 'A majority of the company shareholders expected management to support Prologis' offer.'

Last week Fir Tree Partners, a New York-based private investment firm that holds 4.3% stake in PEPR, said it opposes Prologis' tender offer which it deemed as 'significantly' lower than PEPR's fair value. The minority shareholder noted that PEPR's net asset value is EUR 6.32 under EPRA standards but its 'true value' is even higher because commercial rents are rising as the global economy improves.

PEPR's portfolio comprises 232 distribution facilities, covering 4.9 million m² across 11 European countries with an estimated net market value of EUR 2.8 bn.

Prologis is currently finalising a merger with AMB Property Corporation which will create the world's biggest industrial REIT. Shareholders in the Denver-based group are expected to vote on the merger on June 1.