Prologis has stepped up its battle for Segro after a £12.6 billion takeover was rejected by laying out its investment rationale, while the latter has hit back by accusing the American real estate investment trust of "trying to acquire Segro on the cheap".
Central to Prologis's argument is its view that it can unlock the latent value in the UK's largest REIT's pipeline of data centre site developments. Europe has no listed data centre-only developers, unlike the US.
On 24 June, Prologis, the world's largest listed industrial developer, urged shareholders to consider an all-share offer for Segro tabled at exactly the same price as the net tangible asset per share of 925p. Prologis said that represents a premium of 24.6% to Segro’s share price of 742 pence on 23 June 2026.
On 30 June, Prologis published an investor presentation setting out the strategic and financial rationale for the proposed combination, and the value Prologis believes it could create for Segro shareholders. The presentation is available on the Prologis website.
It says Segro shareholders would participate in major accelerated growth following the combination, including a "substantial upfront premium" from joining a "new, stronger entity".
Prologis says its access to public and private capital would mean it could unlock and accelerate the embedded value in Segro's development and data centre pipeline which the former believes Segro cannot fully realise alone, given its balance sheet and the persistent discount to net asset value on its share price.
Prologis points to its track record of outperformance, "delivering substantial total shareholder returns driven by its development strategy, strategic capital platform, global access to capital and resilient operating performance", as well as successful integration of large-scale acquisitions. Over the past five years it says, total shareholder returns have equalled 38.6% for Prologis, compared with a 20.1% decline for Segro.
Segro initially rejected the proposal, saying it "falls a long way short of [Segro's] own views on value". It says this is partly because US REITs have benefited from a more buoyant stock market.
It added at the time that Prologis's view was "opportunistically timed and sought to take advantage of the clear dislocation between Segro's current share price and its highly attractive underlying business and strong prospects". It said this has been accentuated by "major geopolitical issues which have adversely impacted trading valuations across the UK and European real estate sectors relative to the US REIT sector".
It reiterated this today. Andy Harrison, chairman of Segro, said: “There is nothing in Prologis’s announcement this morning that changes the Board’s clear position. Prologis is trying to acquire Segro on the cheap when our share price has been dislocated by the Middle East conflict and at a price that reflects none of the quality, scarcity and growth embedded in the business.
"We have unanimously rejected their proposal because we continue to believe our compelling standalone investment case can deliver superior shareholder value. Capital is not a constraint on our ability to unlock all of this value upside for our shareholders. We look forward to providing more detail on our growth strategy and value case to the market next week.”
In response to the suggestion that Prologis is taking advantage of a misunderstanding of UK and European real estate, it today highlighted its long-standing presence in the UK and Europe, which has grown to £27.8 billion of assets under management since 1997, and its track record of investing in, developing and operating logistics real estate, including £5.6 billion in the UK over the past decade and a further £5.5 billion publicly committed. It says this underscores its role as a long-term partner in supporting the development of the UK economy.
It adds that it has a long track record of successfully integrating major acquisitions and delivering significant total return outperformance to shareholders after strategic mergers relative to peers. It cites Duke Realty (plus 2,200 basis points since June 2022), Liberty Property Trust (plus 5,400 basis points since October 2019) and DCT Industrial (plus 6,100 basis points since April 2018).
Prologis argues the combined company's ability to accelerate investment across logistics, data centres and energy while leveraging technology and data to further improve "customer centricity" would create a "win-win value proposition for customers and shareholders".
Does the argument for the takeover stack up?
Prologis's move has surprised the global real estate market, sparked debate over what it would mean for the listed sector in Europe and left the market wondering whether it represents fair value.
In a note published on Tuesday, Panmure Liberum provided advice to shareholders on the key points.
It says Prologis's "most quantified" argument is that Segro is capital constrained, particularly that the circa 20% discount to NTA makes it difficult to raise money via share issuance. In particular Prologis can credibly argue that it can more quickly raise the £3.2 billion funding required to complete the development pipeline.
Panmure Liberum says: "While these figures are accurate the conclusion Prologis draws from them, that Segro therefore needs Prologis's balance sheet to capture this opportunity, doesn't hold for the most valuable part of the pipeline. Management has guided to cash equity contributions of typically £75 million-£100 million per data centre scheme of Park Royal's scale, funded via JV structures that keep the bulk of project cost off Segro's own balance sheet. On that basis, Segro's existing liquidity alone could fund 15 to 20 further data centre opportunities without raising a penny of new equity or debt."
Analysts at Peel Hunt say the value attached to Segro undercooks the inherent value.
It argues that the the offer equates to 891p on 30 June, and an NTA discount, estimating that Segro is worth at least 1,050p. "The £19 billion portfolio and the land bank capable of delivering 28 million square feet of development are irreplaceable in our view, and we believe the future value creation opportunity is significant."
It has increased its target price from 825p to 915p. "Any offer for the UK’s largest REIT should adequately reflect the inherent value of the portfolio and its future growth prospects. The all-share possible offer from Prologis, in our view, currently falls well short."
Panmure Liberum also argues it could be a poor outcome for active managers in European real estate.
"Beyond price, there is a structural reason UK and European real estate investors should be wary of this combination. Segro is one of a small number of listed, pure play vehicles offering direct exposure to UK and European data centre and logistics development. If Segro is absorbed into Prologis, that exposure gets absorbed and the capital allocation decision behind it disappears. Investors lose the ability to choose UK/European datacentre and logistics growth specifically, and instead inherit whatever weighting Prologis's management chooses to give the UK and Europe within a global platform spanning 20 countries and £200 billion of combined [assets under management]. The opportunity does not disappear, but it stops being a decision investors can make for themselves."
Prologis has until 22 July to make a formal bid. Whether it comes back with an increased offer or its bid flushes out rival offers – most likely to include take-private offers from global giants such as Blackstone – is yet to be seen.