Prologis Inc. has offered to buy Duke Realty Corp. for $23.7 billion in a deal that would provide one of the country’s largest warehouse owners with more real estate serving the e-commerce market.
A fund uniquely positioned to benefit from the transaction is the Virtus Duff & Phelps Global Real Estate Securities Fund VGISX, which offers material exposure to both Prologis Inc. (6.38% weight, as of March 31), the fund’s top holding, and Duke Realty Corp. (2.67%, as of March 31), a top 10 holding.
An acquisition of Duke would mark Prologis’ largest acquisition to date, according to FactSet. Prologis was formed through the merger of AMB Property Corporation and ProLogis in June 2011, which made Prologis the largest industrial real estate company in the world. Duke Realty, the nation’s leading pure-play, domestic-only, industrial property REIT, is focused on the e-commerce industry, successfully delivering millions of square feet of modern warehouse space for today’s logistics leaders.
Under the terms of the proposal, Duke Realty stockholders would receive 0.466 shares of Prologis common stock for each share of Duke Realty common stock they own. Prologis’ proposal is valued at $61.68 per Duke Realty share, based on Prologis’ closing price on May 9, 2022, and represents a premium of 29% to Duke Realty’s closing price on the same date, according to a statement from Prologis.
“We are confident that the proposed combination will be a win-win for our respective shareholders,” Prologis CEO and co-founder Hamid R. Moghadam said in a statement. “Prologis has a proven track record serving as a leader and innovator in our industry. We are known for providing exceptional service to customers and delivering superior value for our shareholders, including the shareholders of companies we have merged with or acquired in the past. We have no doubt that Duke Realty’s shareholders would similarly benefit from long-term value created by the combination of our companies.”
Following personal dialogue between the executive teams, Prologis first sent a letter to Duke Realty on November 29, 2021 regarding a potential transaction at an exchange ratio of 0.465, representing a 20% premium to Duke Realty’s stock price at the time. Over the past five months, Duke Realty has not substantively engaged, while the implied premium of Prologis’ offer has steadily increased. On May 3, 2022, Prologis modestly increased the proposed exchange ratio — representing a 34% premium to Duke Realty’s stock price at the time — in a final attempt to engage privately to reach agreement on a mutually beneficial transaction. Duke Realty rejected the Prologis proposal that same evening, according to a statement from Prologis.
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