Alegemene Pensioen Groep (APG) and Goodman Group have submitted an informal, non-binding indicative proposal of €6 per share for ProLogis European Properties (PEPR), Europe’s largest owner of distribution facilities. The offer, which values the company at €1.2 billion, equates to a premium of around 20 percent to the share price at the close of trading on Monday.
By lunchtime today, news of the informal offer had sent PEPR’s share up 15 percent on the NYSE Euronext stock exchange to €5.75, giving the company a market capitalisation of just over €1 billion. The company owns 232 properties in 11 countries valued at around €2.8 billion with a portfolio that covers 4.9 million square metres of industrial distribution space.
ProLogis insisted in response to APG and Goodman’s public disclosure of an approach that it had not been contacted by the investor group in relation to any offer to acquire the ordinary units in PEPR.
Nevertheless, APG and Goodman said in their statement yesterday evening that they were considering making an offer together with a group of “like-minded investors” to acquire 100 percent of the shares in PEPR for cash. Their proposal includes a desire for the transfer of PEPR’s management rights away from US group ProLogis to Australia’s Goodman, which already has a sizeable presence in Europe. However, the investor group faces an uphill task, as it said no deal could happen without ProLogis’ support.
APG, as an existing shareholder, and Goodman are hoping ProLogis will open its books and accede to an offer in order to realise shareholder value, having witnessed the company’s shares trade at a “persistent” discount to net asset value. A privatisation also would resolve widely-held concerns regarding PEPR’s strategy and governance structure, said APG and Goodman.
Furthermore, a sale also would mitigate concerns that have arisen with respect to the “additional conflicts of interest” that will result from the proposed $14 billion merger between ProLogis and fellow US industrial REIT AMB Property, which announced a merger at the end of January. “Following this merger, and taking into account the recently announced joint venture between AMB and (German insurance group) Allianz, there would be a total of five ProLogis/AMB vehicles that invest in core European logistics assets and therefore may be competing for the same opportunities in the same territory,” the pair said.
It is expected that, should any takeover be successful, APG and Goodman would each hold around 25 percent of the privatised company, with remaining stakes being taken by its partners in the deal, which APG and Goodman referred to as “leading global real estate investors”. The pair last teamed up to successfully bid and take over ING Industrial Fund in Australia for $2.5 billion earlier this year.
PEPR is managed by ProLogis Management Sarl, which in turn is owned by ProLogis. “If ProLogis were to reconsider its rejection of the indicative proposal, a fully documented proposal could be ready within six to eight weeks, with the full cooperation of ProLogis, ProLogis Management Sarl and the independent directors of the board of PEPR,” said APG and Goodman.
Patrick Kanters, managing director global real estate at APG, said in a statement: “As manager of its clients’ assets, APG has the obligation to its clients to maximise the value of the investments we manage on their behalf. Ever since PEPR’s IPO, we have repeatedly called upon ProLogis and PEPR management to address PEPR’s governance and strategy issues to try and close the persistent gap between PEPR’s unit price and underlying NAV, but to no avail. With this proposed transaction, APG is seeking to deliver value for all unitholders.”
Greg Goodman, chief executive of Goodman, added: “We look forward to working alongside our consortium partners to deliver value for all unitholders in PEPR. The geographic location of PEPR’s portfolio is complementary to our existing European footprint. Our experience in managing assets across these markets is a key factor behind our participation both as an investor in the consortium and as its operational and strategic partner.”
Macquarie Capital Advisers is acting as financial adviser to APG, Goodman and the consortium.