Prologis, a warehouse giant, announced Monday that it would acquire Duke Realty, a smaller competitor, in an all-stock transaction valued at $26 billion including debt. This is a vote to support the hot industrial real estate sector.
This announcement comes after Duke Realty rejected Prologis’ nearly $24 billion offer to buy out its business.
As of Friday’s close, Duke Realty had a market cap of approximately $19.1 billion. Prologis stock has fallen slightly more than 30%, but its shares have declined 24% so far in the year.
There are growing concerns that industrial real estate owners may be under pressure as the demand for warehouse space is decreasing due to a drop in e-commerce activity by retailers. The Wall Street Journal reported last month that Amazon wanted to sublease 10 million square feet of warehouse space, and potentially to end or renegotiate certain leases. Investors in this sector, which has been on a steady upward trend in recent years, were frightened by the news.
Target, Walmart, and Dick’s Sporting Goods are just a few of the companies that have been looking to make their stores mini fulfillment centers closer to customers’ homes.
Prologis, a company with a market capitalization of almost $87 billion, saw its shares drop more than 6% Monday afternoon following the news. Duke Realty shares rose by more than 2%.
Prologis has approximately 1 billion square feet in warehouses and distribution centres used by companies like Amazon, Home Depot, and FedEx. Duke Realty manages approximately 160 million square feet in industrial real estate across 19 U.S. logistic markets.
A press release stated that both companies’ boards have unanimously approved the transaction.
According to the agreement, Duke Realty shareholders will be entitled to 0.475 Prologis shares for every Duke Realty share they have. The transaction is expected close by the fourth quarter.
Prologis stated that the transaction will enable it to acquire properties in key geographical regions and cities such as Southern California, New Jersey and South Florida.
It stated that it intends to retain 94% of Duke Realty assets and to exit one market.
Prologis has increased its real estate footprint by making acquisitions in recent years. In 2020, it bought Liberty Property Trust and DCT Industrial Trust.
It’s not the only one that is looking to acquire more logistics facilities. In a deal worth approximately $4 billion, Industrial Logistics Properties Trust purchased Monmouth Real Estate Investment Corp.
