ProLogis plans to make an offer for ProLogis European Properties that values Europe’s biggest warehouse owner at 1.2 billion euros ($1.7 billion), beating a bid by APG Algemene Pensioen Groep NV and Goodman Group.
ProLogis, the world’s largest warehouse operator, will offer 6.10 euros in cash for each PEPR unit after raising its stake to about 38 percent, the Denver-based company said in a statement today. That’s 22 percent more than the closing price on April 12, when APG and Goodman announced their 1.1 billion-euro bid. PEPR is a fund managed by ProLogis.
ProLogis and APG have clashed over the legal structure of the fund, which owns 232 properties across Europe with a value of 2.8 billion euros. For European listed companies, PEPR has a corporate governance structure that is among the worst, according to Ruud Van Maanen, an analyst at ABN Amro Group NV.
“This isn’t a classical takeover battle,” Van Maanen said by telephone from Amsterdam. “The APG consortium could raise its offer, but even then ProLogis can still simply reject that or refuse to give up the management contract.” Van Maanen said he is reviewing his “reduce” rating on the stock.
PEPR climbed 8 percent to 6.21 euros at the 5:30 p.m. close in Amsterdam, the highest since September 2008. Goodman fell 1.4 percent to 70 Australian cents in Sydney. This would be the biggest bid for a European property company since December 2009, when Paris-based Icade SA bought Morgan Stanley’s stake in Cie La Lucetee for 1.25 billion euros.
Third Avenue Management LLC sold its 5.49 percent stake to ProLogis for a price higher than the New-York based investor had originally expected, said Michael Winer, portfolio manager.
“We think 6.10 euros is full value,” Winer said by phone today. “Our expectation was that we’d ultimately get about 6 euros. It crystallized value for us much earlier than we had hoped. We think it’s a great price.”
APG and Goodman noted ProLogis’ offer “with interest,” according to an e-mailed statement today. The two companies said they won’t make a more detailed announcement until ProLogis discloses more information about the bid.
ProLogis’ offer is “very compelling” and provides any holders with liquidity, its chief executive officer, Walt Rakowich, said in an interview. No other unit holders have tendered their stakes, he said.
“I’ve not been on the line with shareholders. It’s way too early,” Rakowich said. “It’s a compelling offer and at the end of the day, there will be a number of shareholders that will like this offer. We’ll just have to wait and see.”
APG is the Amsterdam-based manager of Europe’s biggest retirement plan and Sydney-based Goodman is Australia’s biggest industrial real estate investment trust by market value.
Following the initial bid, ProLogis said it has no intention of selling its stake in PEPR or giving up the management contract. JPMorgan Chase & Co. is advising the U.S. company, which agreed in January to merge with San Francisco-based AMB Property Corp.
PEPR has refinanced or paid more than 1.3 billion euros of debt in the past two years, ProLogis said in today’s statement. The occupancy rate for the fund’s properties have also been higher than the European market as a whole.
ProLogis’ offer means that APG, the second-largest PEPR shareholder, can now sell its 12 percent stake for a 22 percent premium to PEPR’s closing share price of 5 euros on April 12. It would be a “mistake” for APG not to sell its stake when it can’t buy the company, Winer said.
“They forced ProLogis’ hand,” he said from New York. “It was a good move by APG to bring Goodman in to make it look like it was a real offer, but their ulterior motive might have been to just get ProLogis to move.”
APG is trying to end years of disagreement with ProLogis on the management and governance of the European fund, according to the Dutch company’s statement two days ago. Its offer of 6 euros per unit would “resolve widely held concerns regarding PEPR’s strategy and governance structure,” APG and Goodman said in the statement.
Under takeover rules in Luxembourg, where PEPR is based, ProLogis had to make a bid for all of the units after its stake exceeded the 33.33 percent threshold. Both of the bids are less than PEPR’s net asset value of 6.32 euros per ordinary unit as of Dec. 31, based on EPRA guidelines.
APG and Goodman would join a group of pension and sovereign wealth funds to finance a transaction, the pair said. APG and Goodman would hold stakes of about 25 percent each.