Segro, the United Kingdom's largest real estate investment trust, has accepted United States industrial group Prologis's £14.3 billion takeover offer, in one of the country's largest real estate transactions.
A stock market announcement confirming the Segro board recommendation this morning draws a line under a period of back-and-forth between the two companies after Prologis made its ambitions to buy Segro public on 24 June.
The largest listed industrial developer in the United States and Segro said the takeover will complete in the first half of next year in a deal that will see Segro shareholders receive 0.92 Prologis shares for each Segro share and will include a partial cash alternative of £3.509 billion.
The deal is conditional on the approval of Segro shareholders, new Prologis shares having been approved for listing on the New York Stock Exchange and Prologis shares being admitted to trading on the main market for listed securities of the London Stock Exchange.
No more detail was given of how the company will operate structurally, its senior leadership or the proposed London Stock Exchange listing.
The value attached to Segro, when including the payment of a final dividend of up to 22.56p per Segro shar, now reaches £14.3 billion, a premium of 42.1% to Segro's closing share price on 23 June, the day before the beginning of the offer period, and 16.9% to Segro's European Public Real Estate Association net tangible assets of 902p at 30 June.
Segro had initially robustly dismissed Prologis's first £13.5 billion offer as undervaluing its business and unfairly taking advantage of the effect of global geopolitical events on European real estate share prices. It had termed Prologis's offer "opportunistic, one-sided and inadequate", providing a defence that valued its business at 1312p per share.
Prologis had sweetened the deal in three counter-offers that increased the bid value and added a partial cash alternative and the potential for a part-listing in London.
Final offer
Under the final offer, which Segro said it was minded to recommend on 22 July, Segro shareholders would hold 8.9% of the shares in the combined group.
Segro is the 11th firm worth over £1 billion to have agreed to leave the London Stock Exchange this year following a takeover.
Prologis is already a major long-standing investor in the UK and Europe, building a business with £28 billion of assets under management since 1997. Over the past 28 years, it has built a portfolio spanning 251 million square feet across 12 countries and 50 markets in the region, supported by established operating, development and investment management capabilities and institutional capital partnerships.
Prologis says the combined group would have a European operating portfolio of approximately 368 million square feet, more than tripling Segro's existing European footprint. It would have around £200 billion of assets under management globally.
Prologis said it sees significant growth opportunities and supportive market dynamics in Europe over the medium term and it expects the combined group to present increased opportunities for Segro's customers and employees as part of a broader global organisation.
Importantly, Prologis believes that its "global platform, balance sheet strength and diversified capital base can accelerate the realisation of the significant embedded value of Segro's development and data center pipeline".
Daniel Letter, chief executive of Prologis, said in a statement: "We are pleased to have reached agreement with the Segro Board on a combination that we believe will create meaningful value. This deal brings together Segro's exceptional portfolio and customer relationships with Prologis' global platform, operating expertise and financial strength.
"We have great respect for Segro, its people and the business they have built over many years. The constructive engagement between our leadership teams throughout this process has reinforced our confidence in the opportunity ahead."
David Sleath, chief executive of Segro, said: "Segro has built a unique business over many decades, assembling an irreplicable portfolio of high-quality industrial, logistics and data centre assets in some of Europe's most attractive locations. Through the dedication of our people and the strength of our customer relationships, we have a proven track record of value creation over many years.
"Prologis shares our conviction in the long-term structural drivers underpinning demand for modern logistics and data centre infrastructure. We believe the combination would bring together two highly complementary businesses and create a compelling platform, combining Segro's exceptional portfolio and development pipeline with Prologis' existing European business and global scale, customer franchise and operational capabilities, while retaining a shared commitment to disciplined capital allocation, customers and people.
"Prologis' proposal provides Segro shareholders with a compelling opportunity to realise the value created by Segro and benefit from the future growth of the combined group."
Analysts at Peel Hunt argues that as Segro shareholders are set to receive nearly £4 billion in cash (including the 2026 interim and final dividends) up to completion of the deal this could provide a "supportive basis" for them to reinvest in a "number of UK REITs offering similar high quality characteristics".