Alegemene Pensioen Groep (APG), a 12 percent shareholder in ProLogis European Properties (PEPR), has never quite seen eye-to-eye with the company’s Denver-based manager over corporate governance issues. Even before the initial public offering of PEPR in 2006, it was against the corporate structure.
Since then, that sore has festered. Last month, APG decided the best way to treat it was to try to take the company private, making a €1.2 billion bid for PEPR through a small consortium of like-minded investors.
The issue at the heart of the matter, according to Patrick Kanters, APG’s global head of real estate, is that the gap between PEPR’s net asset value and its share price has been “persistent.” Furthermore, that gap is not helped, in his opinion, by the management structure.
Denver-based ProLogis took PEPR public via the Euronext stock exchange five years ago, but it retained the external management of the company while also retaining a 33 percent stake in the public entity.
Kanters likens PEPR to a pool of assets, rather than a traditional company with internal management. He said one of the main issues was that independent members of the management board had “very limited authority,” and consequently there was limited protection for shareholders other than ProLogis.
“We have been long-standing investors, even before the IPO,” Kanters said. “We were against the IPO because of the governance structure, not so much the listing itself. Ever since then, we have been trying through dialogue with ProLogis management to improve the structure and strategy in order to close the persistent gap between the share price and the net asset value.”
Making the sore worse has been the recent announcement of a $14 billion merger between ProLogis and fellow US-based industrial giant, AMB Property. APG said that post-merger there would be no fewer than five ProLogis/AMB vehicles that invested in core European logistics assets, and therefore they may be competing for the same opportunities in the same territory. “It is important we bring this out to the market,” Kanters added.
APG’s solution to make an indicative bid for PEPR was both successful and unsuccessful. It offered €6 per share for the company, but this was rejected by ProLogis, which made it clear it would not entertain the idea of APG buying its shares or of being replaced as manager by APG’s partner, Australia’s Goodman Group, which sees the chance to gather a stronger hold on the European logistics market.
The move, however, did force ProLogis into making a bid of its own at €6.10 per unit – a 27 percent premium to the average share price over the last six months. In that sense, if a takeover by ProLogis does result – and the outcome was unclear at press time – at least APG can say it forced an exit at a premium for investors. Weighing all the different options, analysts at JP Morgan said the eventual takeover price could reach €7 per share.