Duke Rebuffs Prologis’ $24B Bid

Hamid Moghadam, CEO, Prologis. Image courtesy of Prologis

One day after Prologis went public with its months-long pursuit of Duke Realty Corp., its most recent offer was rebuffed. According to the Wall Street Journal, the offer values the deal at $24 billion. 

In a statement released May 11, Duke said that its board of directors has carefully evaluated the proposals and has “repeatedly made clear to Prologis” that the company is “open to exploring all paths to maximize shareholder value.” But Duke’s board considers “the latest offer, virtually unchanged from its prior proposals, (to be) insufficient in that regard.”

“Our business is robust, and we have significant momentum, as evidenced by the record levels of in-service and stabilized occupancy and considerable leasing success of our development pipeline,” Duke said. “We will continue to drive sustainable value creation and are confident in our ability to generate consistent double-digit growth in FFO, AFFO and dividends for our shareholders for years to come.”

First-quarter highlights reported by the REIT include stabilized properties 99.1 percent leased, development starts valued at $339 million and net diluted income of $0.65 per share, compared to $0.21 per share for the first quarter of 2021

According to the proposal made public, Prologis is offering $61.68 per share. That would expand Prologis’ holdings with an industrial portfolio that currently comprises some 160 million square feet in 19 markets, according to figures on Duke’s website. The offer represents a 29 percent premium to Duke’s closing share price on May 9.

“The terms we are proposing provide Duke Realty shareholders with the opportunity to participate in the growth and upside potential of the combined company, while also delivering an immediate, substantial, and compelling premium,” Prologis CEO Hamid Moghadam wrote to his counterpart at Duke, Chairman & CEO James Connor. Given an exchange ratio of .0466 shares of Prologis stock for each share of Duke stock, Duke shareholders would own 19 percent of the combined company, Moghadam said.

Raising the stakes

The public announcement of Prologis’ offer is apparently a step to advance a process that Moghadam indicated has so far been rebuffed.

“We are making this letter public after numerous private conversations have not led to serious dialogue or consideration,” Moghadam said in the letter. Prologis raised its offer from a 20 percent premium last November to 34 percent on May 3.

Moghadam’s letter indicated that Prologis made an initial proposal in November 2021, followed by additional proposals or meetings in March, April and May. If a deal takes place, it would be the latest in a series of enterprise-level acquisitions by Prologis. In February 2020, the REIT completed a $13 billion acquisition of Liberty Property Trust, a deal which expanded its portfolio by 108 million square feet and a 4.9 million-square-foot development pipeline. That followed Prologis’ 2018 purchase of DCT Industrial Trust for $8.5 billion.