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ProLogis and AMB Property Corporation® Announce Merger of Equals [Real Estate]

AMB Property Corporation and ProLogis announced a definitive agreement to combine through a merger of equals, creating the pre-eminent global owner, operator and developer of industrial real estate. Combined, the companies are expected to have a pro forma equity market capitalization of approximately $14 billion, a total market capitalization in excess of $24 billion, and gross assets owned and managed of approximately $46 billion.

Under the terms of the agreement, each ProLogis common share will be converted into 0.4464 of a newly issued AMB common share, and the combined company will be an UPREIT. The merger is subject to customary closing conditions, including receipt of approval of AMB and ProLogis shareholders. The parties currently expect the transaction to close during the second quarter of 2011. The all-stock merger is intended to be a tax-free transaction. Upon completion of the merger, the company will be named ProLogis and will trade under the ticker symbol PLD (NYSE).

The combined company brings together two of the most complementary customer franchises in real estate. The combined portfolio encompasses approximately 600 million square feet (55.7 million square meters) of modern distribution facilities located in key gateway markets and logistics corridors in 22 countries. Both companies have substantial portfolios in North America, Western Europe and Japan. ProLogis is well-established in the United Kingdom and Central and Eastern Europe, and AMB has a significant presence in China and Brazil.

"This merger is about two great companies coming together to create a stronger platform for sustainable value creation and growth. By joining forces, this merger will create a company positioned to be the leading global provider of logistics real estate ― a Blue Chip REIT," said Hamid R. Moghadam, AMB CEO. "The combined company will be a global player active on four continents. This enhanced platform will enable us to better serve the needs of multi-market customers and provide them with both existing world-class facilities and unmatched development capabilities. The combined company will also be well-positioned to create more opportunities and value for both our shareholders and fund investors."

"This combination will help create the most efficient, effective industrial real estate organization with the best, most diverse talent. And, we have developed an achievable plan to put these companies together seamlessly," added Walter C. Rakowich, ProLogis CEO. "The merger of these two leading industrial platforms will advance a number of priorities already underway at each company. These priorities include improving efficiency and reducing costs by better aligning our portfolios through the reduction of non-core assets and the recycling of capital into higher growth opportunities; increasing asset utilization by stabilizing the operating portfolio; leasing up the development portfolio; and monetizing the land bank."

Leadership and Integration

Moghadam, AMB's CEO, and Rakowich, ProLogis' CEO, will serve as co-CEOs through December 31, 2012, at which time Rakowich will retire, and Moghadam will become sole CEO of the combined company. Moghadam also will be Chairman of the Board of the combined company and will be primarily responsible for shaping the company's vision, strategy and private capital franchise. Rakowich will be principally responsible for operations, integration of the two platforms and optimizing the merger synergies. Until December 31, 2012, Rakowich also will serve as Chairman of the Board's executive committee. William E. Sullivan, current ProLogis CFO, will continue to serve as CFO and will retire from ProLogis on December 31, 2012. During this period, Thomas S. Olinger, AMB's current CFO, will be responsible for day-to-day integration activities and report to the CEOs; he will become the CFO of the combined company on December 31, 2012.

The board of directors of the combined company will consist of six board members designated by ProLogis and five board members designated by AMB. Irving F. "Bud" Lyons, III, an existing ProLogis Board member, will serve as Lead Independent Director.

Following the close of the transaction, the combined company's corporate headquarters will be located in San Francisco, and the combined company's operations headquarters will be located in Denver.

Accretion / Cost Savings

The transaction is expected to be immediately accretive, with approximately $80 million in estimated annual gross G&A savings, to be realized upon full integration, which is expected to occur over the 18-month period following the closing.

"We continue to see improvements in operating fundamentals across the globe with increasing occupancies and more positive net absorption," said Rakowich. "As global demand picks up and trade activity returns to more robust levels, we believe our combined footprint and capabilities will allow us to better meet the real estate needs of our global customers and drive future growth."

Private Capital

"Another benefit of this transaction is the companies' complementary private capital businesses. Our combined company will be a market leader in the industrial real estate private capital sector, with a broad range of product offerings across the major markets including the Americas, Europe and Asia and across the risk/return spectrum," said Moghadam. "The combined company will have a global team with deep experience in investment management spanning three decades."

Ownership and Liquidity

On a pro forma basis, following the merger, former ProLogis equity holders will hold approximately 60 percent of the combined company's equity, and former AMB equity holders will hold approximately 40 percent based on the exchange ratio. The combined entity is expected to provide shareholders with enhanced liquidity.

Pro forma Operations and Balance Sheet

Both companies have high-quality, well-located assets. On a pro forma basis, the combined company's owned and managed assets, excluding development, were on average approximately 93 percent leased as of December 31, 2010, outperforming market averages over the last three years. The combined company is expected to have significant liquidity, a strong balance sheet and a well-staggered debt maturity profile provided by long-standing lending partners.

"Our goal is to create one of the strongest balance sheets in the REIT industry, which will provide greater financial flexibility to capture market opportunities across business cycles, improve cost of capital and help better manage currency risk," said Sullivan.

Posted at 22:14

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