ProLogis European Properties (PEPR) has revised its reasoned opinion on ProLogis’ buyout proposal, after the Denver-based industrial giant sweetened its offer late Friday and two large investors subsequently agreed to sell their stakes.
On Friday afternoon, ProLogis – PEPR’s former parent and its current property manager – increased its offer price for all the outstanding shares of PEPR that it does not already own from €6.10 per unit to €6.20 per unit and extended the end date of the acceptance period to May 18. That prompted Algemene Pensioen Groep (APG) to abandon its bid to take the company private and sell its 12 percent stake in PEPR. The sweetened bid also enticed a previously uninvolved investor – an affiliate of the Government of Singapore Investment Corporation – to take ProLogis up on its offer.
Based on those events, the management of PEPR re-evaluated and revised its reasoned opinion against ProLogis’ initial offer, taking into account a number of risk factors that have cropped up as a result of the sweetened price and the subsequent exit of its two largest investors outside ProLogis. While PEPR still sees the offer price as “inadequate from a financial point of view,” its management reluctantly has accepted the sweetened offer for the ordinary units in light of those new risk factors.
Among the risk factors cited in its revised reasoned opinion, PEPR management noted that the sales by its second and third largest investors and ProLogis’ resulting ownership of at least 59.91 percent of the ordinary units and 90.62 percent of the convertible preferred units could affect the trading dynamics of the units, in particular the market liquidity of those units. In addition, it alluded to the potential for a further reduction in liquidity and free float as a result of any other investors tendering their units under the offer and a significantly reduction in the likelihood of an alternative offer materialising.
Peter Cassells, chief executive officer of PEPR, said in a statement: “In reaching our conclusion, we have continued to consult with the independent members of the PEPR board and have received updated external legal and financial advice. While we believe that the revised offer still does not reflect PEPR’s full value potential, unitholders should carefully evaluate their alternatives in light of the further reduced liquidity of the units.”
PEPR, one of Europe’s biggest owners of distribution and logistics facilities, was effectively put into play last month by APG, which wanted to make a €6 per unit offer to take the company private because of corporate governance concerns and a persistent gap between the company’s share price and net asset value. However, its indicative offer was rejected and immediately prompted ProLogis to boost its holdings from 33 percent to 38 percent, triggering a mandatory takeover approach under NYSE Euronext rules. ProLogis offered €6.10 per unit, a price that was rejected by at least one investor as inadequate and ultimately led to the management of PEPR rejecting the proposal as well.