Global industrial giant Prologis has revealed plans to merge with its US peer, Duke Realty, in a deal which will significantly expand its US footprint.
The two companies have entered into a definitive merger agreement by which Prologis will acquire Duke Realty in an all-stock transaction, valued at approximately $26 bn (€25 bn), including the assumption of debt.
The respective board of directors for Prologis and Duke Realty have unanimously approved the transaction.
'We have admired the disciplined repositioning strategy the Duke Realty team has completed over the last decade,' said Prologis co-founder, CEO and chairman Hamid R. Moghadam.
'They have built an exceptional portfolio in the US 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,' Moghadam added.
With the transaction, Prologis gains properties for its portfolio in key geographies, including Southern California, New Jersey, South Florida, Chicago, Dallas and Atlanta.
The acquisition comprises 153 million ft2 (14.2 million m2) of operating properties in 19 US logistics geographies, plus 11 million ft2 of development in progress - about $1.6 bn in total expected investment.
The deal also includes 1,228 acres (500 ha) of land owned and under option with a build-out of approximately 21 million ft2. Prologis plans to hold approximately 94% of the Duke Realty assets and exit one market.
Duke Realty chairman and CEO Jim Connor said: '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.
'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 transaction is anticipated to create immediate accretion of approximately $310-370 mln from corporate general and administrative cost savings and operating leverage as well as mark-to-market adjustments on leases and debt.
'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, Prologis' chief financial officer.
'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.'
Under the terms of the agreement, Duke Realty shareholders will receive 0.475x of a Prologis share for each Duke Realty share they own.
The transaction, which is currently expected to close in the fourth quarter of 2022, is subject to the approval of Prologis and Duke Realty shareholders and other customary closing conditions.
Goldman Sachs Group and Citigroup are serving as financial advisors and Wachtell, Lipton, Rosen & Katz is serving as legal advisor to Prologis.
Morgan Stanley & Co. is serving as the lead financial advisor and Hogan Lovells US is serving as legal advisor to Duke Realty.
JP Morgan Securities and Alston & Bird are also serving as financial and legal advisors, respectively, to Duke Realty.
