Prologis to buy Liberty Property in Us$9.7bil stock deal

NEW YORK: Prologis Inc is buying Liberty Property Trust in an all-stock transaction valued at Us$9.7bil, extending its reach in markets such as Chicago, Houston and Southern California.

Including debt, the deal is valued at Us$12.6bil, the companies said in a statement.

The transaction gives Liberty stakeholders 0.675 Prologis share for each Liberty share they own, a premium of about 21% based on last Friday’s closing prices.

Warehouses and logistics facilities – Liberty’s specialty – have become a hot part of the real estate market as more shopping moves online and demand for the space increases.

Blackstone extended its bet on e-commerce last month, agreeing to buy Colony Capital Inc’s warehouse unit for Us$5.9bil.

And Prologis itself has been a big acquirer of rivals in recent years.

“The deal solidifies that the quickest way to increase exposure to fast-rent-growing warehouses is through M&A,” said Bloomberg Intelligence analyst Lindsay Dutch.

The pricing is similar to Prologis’s purchase of DCT Industrial Trust and its pending takeover of Industrial Property Trust, she said, adding that Liberty would still be the biggest of the three transactions.

The acquisition gives Prologis a portfolio of 107 million sq ft of logistics properties that’s owned or managed as well as buildings under construction and land for future development.

It includes 4.9 million sq ft of office space. “Liberty’s logistics assets are highly complementary to our US portfolio, and this acquisition increases our holdings and growth potential in several key markets,” Prologis chairman and chief executive Hamid R. Moghadam said in the statement.

“The strategic fit between the portfolios allows us to capture immediate cost and long-term revenue synergies.”

Prologis plans to dispose of approximately Us$3.5bil of assets on a pro rata share basis, including Us$2.8bil of logistics properties and Us$700mil of office properties.

Liberty shares have risen 21% this year, compared with the 55% jump in Prologis shares.

An S&P index tracking 32 real estate companies climbed 27%. Prologis is trading at 40 times estimated earnings, compared with a multiple of 35 for Liberty.

The transaction is expected close in the first quarter of 2020. Bank of America Corp. and Morgan Stanley advised Prologis on the transaction, while Goldman Sachs Group Inc and Citigroup Inc represented Liberty.