On June 13, 2022, warehouse giant Prologis said that it will acquire its smaller rival, Duke Realty, in an all-stock deal valued at about $26 billion, including debt, in a vote of confidence for the red-hot industrial real estate sector. The announcement comes after Duke Realty, in May 2022, rejected a nearly $24 billion buyout offer from Prologis, calling it insufficient. The article contains Warehouse Giant Prologis To Buy Rival Duke Realty in $26bn.
Duke Realty had a market capitalization of about $19.1 billion as of the market close. Its shares dropped 24% in 2022, while Prologis’ stock is down slightly more than 30%. Industrial real estate owners have come under pressure with fears mounting that demand for warehouse space could be cooling as retailers’ e-commerce activity drops off from a COVID-19 pandemic high. In addition, the Wall Street Journal reported that Amazon was looking to sublease at least 10 million square feet of its warehouse space and potentially end or renegotiate some of its leases. This news spooked investors in the sector that had been on a tear in recent years.
Companies from Walmart and Target to Dick’s Sporting Goods have also been investing in ways to use their stores as mini fulfillment centers that are closer to customers’ homes. Prologis, which has a market value of nearly $87 billion, watched its shares fall more than 6% in afternoon trading Monday following the news. Conversely, Duke Realty shares rose by over 2%.
Prologis controls roughly 1 billion square feet of warehouses and distribution centers used by companies including Amazon, Home Depot, and FedEx. In addition, Duke Realty owns and operates about 160 million square feet of industrial real estate in 19 major U.S. logistics markets. Both companies’ boards of directors have unanimously approved the transaction.
Under the terms of the agreement, Duke Realty shareholders will receive 0.475 of a Prologis share for each Duke Realty share they own. The transaction is expected to close in the fourth quarter. Prologis said the transaction will allow it to gain properties in key geographic regions and cities, including Southern California, New Jersey, South Florida, Chicago, Dallas, and Atlanta.
It plans to hold 94% of the Duke Realty assets and exit one market. In recent years, Prologis has bulked up its real estate footprint through acquisitions. It bought Liberty Property Trust in 2020 and DCT Industrial Trust in 2018. It isn’t the only player that has been looking to scoop up more logistics facilities, either. Earlier this year, Industrial Logistics Properties Trust bought Monmouth Real Estate Investment Corp. in a deal valued at about $4 billion.
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