Prologis has agreed to buy Duke Realty for $26 billion, the companies announced today, concluding a protracted courtship that saw the Indianapolis-based company rebuff repeated overtures from its fellow giant industrial REIT.
The all-stock deal adds some key puzzle pieces to San Francisco-based Prologis’ sprawling portfolio, including properties in Southern California, Chicago, Dallas, New Jersey, Atlanta and South Florida.
The combination, which takes a major competitor off the board, creates an industrial real estate powerhouse with more than 150 million square feet of space with another 11 million square feet under development.
Duke shareholders will receive 0.475 of a Prologis (NYSE: PLD) share for each Duke (NYSE: DRE) share they own. It is an upgrade from Prologis’ most recent offer, 0.466 of a share, which valued Duke at $24 billion. Both companies’ boards have already approved the improved offer.
Prologis stock was down more than $10, or 8.66%, a share to $107.09, amid another day of broader market turmoil. Duke stock was relatively flat at $49.76 a share.
Prologis revealed last month that it had made a succession of offers to Duke, beginning Nov. 29, but that the target company had failed to “substantially engage” with those offers. In May, Prologis Chairman and CEO Hamid Moghadam sent a public letter to his counterpart at Duke, Jim Connor — and in effect to that company's shareholders — reiterating its desire to buy Duke on terms it said were 20% better than its November bid. Duke rejected that offer within 24 hours, calling it “insufficient.”
Not surprisingly, the companies struck a different tone in announcing the deal today.
”We have admired the disciplined repositioning strategy the Duke Realty team has completed over the last decade," Moghadam said in a statement. "They have built an exceptional portfolio in the U.S. 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."
The deal will create an industrial real estate behemoth with 153 million square feet in 19 geographies, with another 11 million square feet under development.
Prologis said it would also result in more than $300 million in cost savings.