Prologis to buy Liberty Property in US$9.7 billion stock deal

New York

PROLOGIS Inc, one of the world's largest warehouse owners, has agreed to buy Liberty Property Trust in an all-stock transaction valued at US$9.7 billion, extending its reach in markets such as Chicago, Houston and Southern California.

The transaction gives Liberty stakeholders 0.675 Prologis share for each Liberty share they own, the companies said in a statement. That represents premium of about 21 per cent based on last Friday's closing prices.

Warehouses and logistics facilities - Liberty's specialty - have become a hot part of the real estate market as more shopping moves online and consumers demand quick shipping.

Blackstone extended its bet on e-commerce last month, agreeing to buy Colony Capital Inc's warehouse unit for US$5.9 billion.

Prologis itself has been a big acquirer of rivals in recent years.

"The deal solidifies that the quickest way to increase exposure to fast-rent-growing warehouses is through M&A," said Bloomberg Intelligence analyst Lindsay Dutch.

Shareholder Land & Buildings Investment Management began pushing Liberty to consider selling itself about a year ago.

The firm, led by Jonathan Litt, said last month that a "credible party" had contacted the real estate investment trust with an interest in buying it at US$60 a share.

"The proposed sale of Liberty Property Trust to Prologis is a great example of maximising value for all shareholders," Mr Litt said.

The pricing of the deal is similar to Prologis's purchase of DCT Industrial Trust and its pending takeover of Industrial Property Trust, Ms Dutch said, adding that Liberty would still be the biggest of the three transactions.

Including debt, the deal is valued at US$12.6 billion. Prologis is buying a portfolio of 107 million square feet of logistics properties that's owned or managed, as well as buildings under construction and land for future development. It also includes 4.9 million square feet of office space.

"Liberty's logistics assets are highly complementary to our US portfolio, and this acquisition increases our holdings and growth potential in several key markets," Prologis chairman and chief executive officer Hamid Moghadam said.

"The strategic fit between the portfolios allows us to capture immediate cost and long-term revenue synergies."

Prologis plans to dispose of about US$3.5 billion of assets on a pro rata share basis, including US$2.8 billion of logistics properties and US$700 million of office properties.

Liberty shares have risen 21 per cent this year, compared with the 55 per cent jump in Prologis shares and a 45 per cent gain for a Bloomberg index of industrial Reits.

Liberty may be required to pay a termination fee of as much as US$325 million if the deal falls apart. The transaction is expected to close in the first quarter of 2020.

Bank of America Corp and Morgan Stanley advised Prologis, while Goldman Sachs Group and Citigroup represented Liberty. BLOOMBERG