Exchange Ratio of 0.466 Represents 29% Premium for Duke
Realty Shareholders
Provides Significant Growth and Upside
Potential to Both Prologis and Duke Realty
Sends Letter to Duke Chairman and CEO Detailing Merits of
Compelling Proposal
SAN
FRANCISCO, May 10, 2022 /PRNewswire/ -- Prologis,
Inc. (NYSE: PLD) ("Prologis"), the global leader in logistics real
estate, today sent a letter to James B.
Connor, Chairman and Chief Executive Officer of Duke Realty
Corporation (NYSE: DRE) ("Duke Realty") proposing to acquire Duke
Realty in an all-stock transaction.
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.
"We are confident that the proposed combination will be a
win-win for our respective shareholders," said Prologis CEO and
co-founder Hamid R. Moghadam.
"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.
Prologis sent the following letter to Duke Realty's Chairman and
CEO today regarding the proposal:
May 10, 2022
Mr. James B.
Connor
Chairman and CEO
Duke Realty Corporation
8711 River Crossing Boulevard
Indianapolis, Indiana 46240
Dear Jim:
We are writing to reiterate our proposal to
acquire Duke Realty. We are making this letter public after
numerous private conversations have not led to serious dialogue or
consideration. We believe this proposed transaction will be
enthusiastically received by both your and our shareholders.
As you know, and we have stated at multiple
times in the past, we admire and respect what you, your management
team and board have accomplished. Our proposal represents a
terrific opportunity for Duke Realty and your shareholders, who
would receive 0.466 shares of Prologis common stock for each share
of Duke Realty common stock. Based on Prologis' latest closing
price1, this proposal values Duke Realty at $61.68 per share, representing a premium of 29%
to Duke Realty's closing price on May 9,
2022.
On almost every metric (current stock price,
VWAPs and consensus price targets) our proposal provides Duke
Realty's shareholders with a premium at the absolute top tier of
valuation, as compared to other comparable REIT transactions. The
terms we are proposing provide Duke Realty shareholders with the
opportunity to participate in the growth and upside potential of
the combined company, while also delivering an immediate,
substantial, and compelling premium.
Based on the clear strategic and financial
benefits outlined below, we are highly confident the addition of
your assets to our platform will deliver superior value to the
shareholders of both companies over the long term. The benefits
include:
-
-
- Highly Strategic & Complimentary Combination
- Incremental Value Created from Prologis' Platform
- Enhanced External Growth
- Significant Synergies
- Day 1 Accretion to Core FFO (less promotes) to Both
Shareholders
One thing that sets Prologis apart from others
in our industry is a substantial strategic capital business and our
Essentials platform. The Essentials platform includes solutions
around operations, energy, workforce, transportation and digital –
offerings that we provide to customers inside and outside of the
Prologis portfolio. The Essentials platform will continue to fuel
superior growth. At this point, we are creating recurring revenue
both in our own platform and others, including yours.
In addition, our track record on creating value
through acquisitions is incredibly strong. Our acquisitions of DCT
Industrial Trust Inc. and Liberty Property Trust materially
benefited the shareholders of those companies through our
outperformance since acquisition, outperforming their peers by 41%
and 22% respectively.2
I have no doubt your shareholders will similarly
benefit.
I would note, at the proposed exchange ratio,
Duke Realty shareholders will own 19% in the combined company. This
would represent on average 26% more ownership in the combined
company than would be implied by a straightforward ownership split
based on Duke Realty's earnings contribution in the combined
company (whether measured on 2022 or 2023 consensus, FFO or
AFFO).
In previous communications, you have contended
that the premium is not enough to engage seriously with us. Your
shareholders should be aware that the immediate value of our offer
has increased by approximately 10% since we began our dialogue more
than five months ago:
-
-
- In November 2021, we proposed a
fixed exchange ratio of 0.465x representing a 20% premium. In
response, you indicated that the proposal did not present a
compelling premium to Duke Realty shareholders. You also noted that
you believed "a premium in the high 20 or low 30 percent range" was
warranted.
- In March 2022, we met to discuss
the merits of a potential business combination and we reaffirmed
our willingness to afford your shareholders the same fixed exchange
ratio of 0.465x, which then implied an approximately 28% premium.
Even with an increasingly compelling premium, you were unwilling to
engage further.
- On April 29, 2022, we had a
lengthy conversation in which I reiterated our willingness to
transact at the same previously proposed fixed exchange ratio,
which continued to imply a compelling premium in-line with your
previously articulated expectation.
- On May 3, 2022, we modestly
increased our proposed exchange ratio, as a goodwill gesture, to
0.466x, which represented a 34% premium at the time. Later that
same evening, you again declined our offer.
Setting the current market volatility aside, we
view this combination as a long-term strategic benefit. As evidence
of that, the offer represents a 32% premium to the 30-day volume
weighted average prices (VWAP).
While we would prefer to continue working
privately with you, as we have with others, to reach agreement for
the benefit of your shareholders and ours, this approach is clearly
not working as detailed above. This led us to conclude that a
public approach may be more constructive for all.
We have engaged Goldman Sachs & Co. LLC and
Wachtell, Lipton, Rosen & Katz to assist us in completing this
transaction. Our transaction would not be subject to any unusual
governmental or third-party approvals, or any other significant
contingencies. We believe that this transaction can be completed
quickly.
Jim, we are committed to completing the
acquisition of Duke Realty. I hope that you, your board and your
advisors are prepared to engage with us. Again, we firmly believe
this proposal is the best path to driving long-term value for Duke
Realty shareholders.
Sincerely,
Hamid R.
Moghadam
Co-Founder, Chairman & CEO
1 $132.37 closing price as of May 9, 2022.
2 Based on total shareholder returns weighted by
market capitalization per Bloomberg as of May 9, 2022 and as of each respective transaction
closing date. Peer set includes DRE, EGP, FR, PSB, REXR, STAG, and
TRNO.
Goldman Sachs & Co. LLC is serving as financial advisor to
Prologis and Wachtell, Lipton, Rosen & Katz is serving as legal
advisor.
ABOUT PROLOGIS
Prologis, Inc. is the global leader in logistics real estate
with a focus on high-barrier, high-growth markets. As of
March 31, 2022, the company owned or
had investments in, on a wholly owned basis or through
co-investment ventures, properties and development projects
expected to total approximately 1.0 billion square feet (93 million
square meters) in 19 countries. Prologis leases modern logistics
facilities to a diverse base of approximately 5,800 customers
principally across two major categories: business-to-business and
retail/online fulfillment.
FORWARD-LOOKING
STATEMENTS
The statements in this communication that are not historical
facts are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. These
forward-looking statements are based on current expectations,
estimates and projections about the industry and markets in which
Prologis and Duke Realty operate as well as management's beliefs
and assumptions. Such statements involve uncertainties that could
significantly impact Prologis' or Duke Realty's financial results.
Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," and "estimates," including variations of such
words and similar expressions, are intended to identify such
forward-looking statements, which generally are not historical in
nature. All statements that address operating performance, events
or developments that Prologis expects or anticipates will occur in
the future — including statements relating to any possible
transaction between Prologis and Duke Realty, rent and occupancy
growth, acquisition and development activity, contribution and
disposition activity, general conditions in the geographic areas
where Prologis or Duke Realty operate, Prologis' debt, capital
structure and financial position, Prologis' ability to earn
revenues from co-investment ventures, form new co-investment
ventures and the availability of capital in existing or new
co-investment ventures — are forward-looking statements. These
statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions that are difficult to
predict. Although Prologis believes the expectations reflected in
any forward-looking statements are based on reasonable assumptions,
Prologis can give no assurance that its expectations will be
attained and, therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such
forward-looking statements. Some of the factors that may affect
outcomes and results include, but are not limited to: (i) the
ultimate outcome of any possible transaction between Prologis and
Duke Realty, including the possibility that Duke Realty will reject
the proposed transaction with Prologis; (ii) uncertainties as to
whether Duke Realty will cooperate with Prologis regarding the
proposed transaction; (iii) the effect of the announcement of the
proposed transaction on the ability of Prologis and Duke Realty to
operate their respective businesses and retain and hire key
personnel and to maintain favorable business relationships; (iv)
the timing of the proposed transaction; (v) the ability to satisfy
closing conditions to the completion of the proposed transaction
(including shareholder approvals); (vi) other risks related to the
completion of the proposed transaction and actions related thereto;
(vii) national, international, regional and local economic and
political climates and conditions; (viii) changes in global
financial markets, interest rates and foreign currency exchange
rates; (ix) increased or unanticipated competition for Prologis' or
Duke Realty's properties; (x) risks associated with acquisitions,
dispositions and development of properties, including increased
development costs due to additional regulatory requirements related
to climate change; (xi) maintenance of Real Estate Investment Trust
status, tax structuring and changes in income tax laws and rates;
(xii) availability of financing and capital, the levels of debt
that Prologis and Duke Realty maintain and their credit ratings;
(xiii) risks related to Prologis' investments in co-investment
ventures, including Prologis' ability to establish new
co-investment ventures; (xiv) risks of doing business
internationally, including currency risks; (xv) environmental
uncertainties, including risks of natural disasters; (xvi) risks
related to the coronavirus pandemic; and (xvii) those additional
factors discussed under Part I, Item 1A. Risk Factors in Prologis'
and Duke Realty's respective Annual Reports on Form 10-K for the
year ended December 31, 2021.
Prologis undertakes no duty to update any forward-looking
statements appearing in this communication except as may be
required by law.
Additional Information
This communication does not constitute an offer to buy or
solicitation of an offer to sell any securities. This communication
relates to a proposal which Prologis has made for an
acquisition of Duke Realty. In furtherance of this proposal and
subject to future developments, Prologis (and, if a negotiated
transaction is agreed, Duke Realty) may file one or more
registration statements, proxy statements or other documents with
the SEC. This communication is not a substitute for any proxy
statement, registration statement, prospectus or other
document Prologis and/or Duke Realty may file
with the SEC in connection with the proposed transaction.
Investors and security holders
of Prologis and Duke Realty are urged to read
the proxy statement(s), registration statement, prospectus and/or
other documents filed with the SEC carefully in their
entirety if and when they become available as they will contain
important information about the proposed transaction. Any
definitive proxy statement(s) or prospectus(es) (if and when
available) will be mailed to stockholders of Prologis
and/or Duke Realty, as applicable. Investors and security
holders will be able to obtain free copies of these documents (if
and when available) and other documents filed with the SEC
by Prologis through the web site maintained by the SEC at
http://www.sec.gov.
This document shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
This communication is neither a solicitation of a proxy nor a
substitute for any proxy statement or other filings that may be
made with the SEC. Nonetheless, Prologis and its
directors and executive officers and other members of management
and employees may be deemed to be participants in the solicitation
of proxies in respect of the proposed transactions. You can find
information about Prologis' executive officers and
directors in Prologis' definitive proxy statement filed with
the SEC on March 25, 2022. Additional information
regarding the interests of such potential participants will be
included in one or more registration statements, proxy statements
or other documents filed with the SEC if and when they
become available. These documents (if and when available) may be
obtained free of charge from
the SEC's website http://www.sec.gov.
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SOURCE Prologis, Inc.