ProLogis, AMB Complete Merger

June 3, 2011
By Barbra Murray, Contributing Editor

AMB Property Corp. and ProLogis, reigning giants of the real estate industry, have become one in the completion of a 100 percent stock merger that the companies have described as a “merger of equals” since announcing the pending transaction in January. The combined entity is ProLogis Inc. and boasts a 600 million-square-foot global portfolio of industrial assets under management valued at $46 billion.

The new company, structured as an umbrella partnership REIT, will trade under the symbol PLD. As per terms of the transaction, each former ProLogis share has been converted to into 0.4464 of a share of PLD’s common stock, and each AMB common stock has become a single PLD share. Former ProLogis common equity holders hold approximately 60 percent of PLD’s common stock, leaving previous AMB holders with the remaining 40 percent.

On the leadership front, Hamid R. Moghadam and Walter C. Rakowich, former CEOs of AMB and ProLogis, respectively, will hold the positions of co-CEOs until year’s end, after which Rakowich will retire and leave Moghadam holding the reins of what is now the world leader in the industrial real estate industry.

PLD boasts a presence as a property owner, operator and developer in 22 countries across the Americas, Europe and Asia. “It will provide one-stop shopping,” Ki Bin Kim, analyst with Macquarie Equity, told CPE. “If you’re a multinational company, they can put you anywhere in the world. If you want a new space or you want to get into a new market, they have the land bank and they have the capital to do it.”

The unification of the two most prominent industrial real estate companies into a single entity will enhance their asset utilization and fuel growth through development and land bank monetization. “AMB was really the beneficiary in the merger; they got the better end of the transaction, from a financial perspective,” Dave Rodgers, analyst with RBC Capital Market, told CPE. “AMB had been inefficient in its global expansion but now it can much more quickly expand its global footprint. And ProLogis has a very sizeable land bank, so the merger increases their future growth capability.”

And then there is the creation of synergies that is expected to result in significant annual gross savings in general and administrative expenses. “They’re going to save $80 million just form duplicate labor,” Kim noted. It is unclear how many jobs will be lost in the process.

The melding of the ProLogis and AMB businesses into a singular power is underway and the timing of the union appears to be just right, many industry experts believe. “They’ve created a strong company at a point in the cycle when it’s improving, but most private developers are still having trouble accessing capital. The new company is going to be a very competitive force in the global market.”