August 21, 2018
Prologis’ $8.4-billion M&A deal with DCT Industrial Trust can move to the finish line. Stockholders in Denver-based DCT have voted overwhelmingly in favor of the deal, which will garner them 1.02 Prologis shares for each share of DCT they own, a 15.6% premium on share values at the time the merger was announced. It’s expected to close on August 22.
The latest in a series of sizable M&A transactions that both the U.S. and global industrial sectors have seen in recent years, the Prologis/DCT combination was first announced on April 30. In an investors’ call discussing the deal the same day, DCT CEO Philip Hawkins said, “We’ve competed against Prologis now for many years, and it’s always been apparent to us that their approach to operating, investing and developing is very consistent with our own.”
In weighing the offer from Prologis, DCT’s board concluded that “we would have a much better opportunity to create value with Prologis because of the combined companies’ significant scale, cost of capital and platform advantages,” Hawkins said on that April 30 call.
At a high level, said Prologis’ Eugene Reilly, DCT’s real estate assets include “a 71-million-square-foot operating portfolio, a seven-million-square-foot development and value-add program, and over 400 acres of owned and controlled land. All of these assets are located in markets and submarkets that Prologis considers strategic, and in which we have scale and operating presence.”
Although the two companies’ portfolios are complementary, that doesn’t mean there isn’t any overlap that will have to be addressed through dispositions post-merger. However, Prologis CEO Hamid Moghadam pointed out on the investors’ call, it will be a comparatively small number of dispositions.
“What we pick up is 71 million square feet of irreplaceable real estate, and we’re keeping 93% of it,” Moghadam said. “This is not our first rodeo here. When we did the AMB-Prologis merger, we even had to go through $14 billion of dispositions to get the portfolio to where we wanted to be. When we went through the KTR transaction, we disposed between 18% and 20% of the portfolio to get it to where we wanted to be.”
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