Warburg to Eye Bigger Asia Logistics IPO in GLP Pursuit

Updated on
  • Deal for GLP would help boost presence in second-tier cities
  • Warburg’s logistics business run by former Prologis executives

Warburg Pincus, one of several bidders pursuing Global Logistic Properties Ltd., is weighing a merger of the Singapore warehouse owner with its own logistics business E-Shang Redwood Ltd. before a planned initial public offering, people with knowledge of the matter said.

The U.S. buyout firm is bidding together with ESR, which is providing equity in the consortium, according to the people, who asked not to be identified because the talks are private. If Warburg Pincus succeeds in acquiring GLP, which has a market value of $9.2 billion, it will consider combining the two companies ahead of any listing in mainland China or Hong Kong, the people said.

Warburg Pincus, which is positioning itself as a strategic bidder for GLP, has other partners joining its bidding group, according to the people. A GLP merger would help ESR bulk up before a share sale by boosting its presence in other parts of China, particularly second-tier cities, the people said. Final offers are expected around the end of May after suitors have studied detailed information on GLP’s business, the people said.

Warburg Pincus is counting on ESR’s operational expertise to help run GLP in the future as it goes head-to-head in the bidding with a rival consortium that includes GLP Chief Executive Officer Ming Mei. ESR is targeting as much as $3 billion in so-called development starts in 2017, the people said. GLP was planning to break ground on $2.1 billion of new projects in the current fiscal year ended March, according to an investor presentation this month.

Prologis Experience

Jeffrey Shen, one of ESR’s co-chief executive officers, is a former senior vice president at GLP, according to its website. Fellow ESR co-founders Stuart Gibson and Charles de Portes were previously executives at Prologis Inc., which sold Asian industrial properties to Singapore sovereign fund GIC Pte in a 2008 deal that led to GLP’s creation.

“A global logistics footprint straddling the major industrial economies has never been attempted since Prologis retrenched,” said Priyaranjan Kumar, regional executive director of capital markets at Cushman & Wakefield Inc. in Singapore. “The attractiveness of being embedded in the fabric of the new global trade order is undeniably a powerful motivation.”

There is no certainty an IPO of the logistics assets of Warburg Pincus will take place, said the people. Representatives for ESR and Warburg Pincus declined to comment.

GLP shortlisted at least three groups in a deal that may become Asia’s biggest buyout, people with knowledge of the matter said last month. A management-backed consortium that includes Chinese investment firms Hillhouse Capital Management and Hopu Investment Management has been invited to prepare a final bid, as have Blackstone Group LP and the Warburg Pincus-led investor group, the people said at the time.

Logistics are a key focus for Warburg Pincus, as it sees the sector underpinning growth in all other industries, Southeast Asia head Jeffrey Perlman said in an interview this month. ESR was created through last year’s merger of Redwood Group Asia Pte and E-Shang Cayman Ltd., which Warburg Pincus founded with two entrepreneurs in 2011.

ESR said in January it closed a $300 million pre-IPO fundraising by selling preferred equity to a group of Chinese investors. The company has more than 7.3 million square meters (79 million square feet) of logistics property projects owned and under development in China, Japan, Singapore and South Korea, according to a press release last month. Its investors include APG Asset Management NV, Canada Pension Plan Investment Board and Ping An Insurance (Group) Co.

GLP has a $38 billion real estate portfolio comprising 53.7 million square meters, with more than 80 percent of its net asset value coming from property in China and Japan, a March presentation shows.

— With assistance by Pooja Thakur Mahrotri

(Updates with property broker’s comment in sixth paragraph.)
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