Prologis Agrees to Acquire Duke Realty in $26B All-Stock Transaction

by Taylor Williams

SAN FRANCISCO AND INDIANAPOLIS — San Francisco-based industrial giant Prologis Inc. (NYSE: PLD) has agreed to acquire Indianapolis-based Duke Realty (NYSE: DRE) for $26 billion in an all-stock transaction, including debt.

The mega-merger of these two REITs is scheduled to close in the fourth quarter. The board of directors for each company has already unanimously approved the transaction.

In May, Prologis offered to acquire Duke in an all-cash transaction for $61.68 per share, a proposal that would have generated a price tag of $23.7 billion. The offer, which was tendered on May 10, represented a 29 percent premium over Duke’s closing stock price on the previous day. However, Duke rejected the offer.

The transaction includes Prologis’ assumption of Duke Realty’s existing debt. Duke’s shareholders will receive a premium of 47.5 percent over the current value of each share of common stock they own. Prologis plans to hold 94 percent of the acquired assets.

Prologis expects to achieve $310 million to $370 million in reduced general and administrative costs and consolidated corporate leverage as a result of the acquisition. In addition, Prologis said it was drawn to Duke’s presence with high-performing industrial facilities in key markets, including Southern California, New Jersey, South Florida, Chicago, Dallas and Atlanta.

The scope of those acquired assets included 153 million square feet of stabilized industrial properties across 19 U.S. markets, as well as 11 million square feet of product in various stages of development and 1,228 undeveloped acres with a build-out potential of approximately 21 million square feet. Duke Realty became a pure-play industrial REIT in 2017 when it sold its entire portfolio of medical office properties to Healthcare Trust of America (NYSE: HTA) for $2.8 billion.

“We have admired the disciplined repositioning strategy the Duke Realty team has completed over the last decade,” says Hamid Moghadam, Prologis co-founder, CEO and chairman. “They have built an exceptional portfolio in U.S. locations that we believe will outperform in the future.”

“Together, we will be able to accelerate the potential of our business and better serve tenants and partners,” adds Jim Connor, Duke Realty’s chairman and CEO. “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.”

Prologis currently has a market cap of $79.45 billion compared with $19.41 billion for Duke Realty.

Goldman Sachs and Citigroup are serving as financial advisors to Prologis, and Wachtell, Lipton, Rosen & Katz is serving as legal advisor. Morgan Stanley & Co. LLC is serving as the lead financial advisor to Duke Realty, with Hogan Lovells US LLP is providing legal counsel. J.P. Morgan Securities LLC and Alston & Bird LLP are also serving as financial and legal advisors, respectively, to Duke Realty.

The stock price of Prologis opened at $120 per share on Monday, June 13, following the news of the acceptance of the revised offer. The company’s stock price is down slightly from $124.93 per share a year ago. Duke Realty’s stock price opened at $51.22 per share on June 13, up slightly from $49.30 per share a year ago.

— Taylor Williams

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