Prologis Inc. and Denver-based DCT Industrial Trust Inc. have entered into a definitive merger agreement by which Prologis will acquire DCT for $8.4 billion in a stock-for-stock transaction, including the assumption of debt. The boards of directors of both companies unanimously approved the transaction.
“For some time, we have considered DCT’s realigned portfolio to be the most complementary to our own in terms of product quality, market position and growth potential,” said Prologis Chairman and CEO Hamid R. Moghadam. “This high level of strategic fit will allow us to capture significant scale economies immediately. In addition, our current platform initiatives, particularly in the areas of advanced analytics, customer experience and procurement and ancillary revenues, will enable us to extract significant upside from the combined portfolios.”
The 71 million-square-foot operating portfolio deepens San Francisco-based Prologis’ presence in high-growth markets including Southern California, the San Francisco Bay Area, New York/New Jersey, Seattle and South Florida. The acquisition also includes:
- 7.1 million sf of development, redevelopment and value-added projects
- 195 acres of land in predevelopment, predominantly in Seattle, Atlanta, South Florida and Southern California with build-out potential of over 2.9 million square feet
- 215 acres of land under contract or option, predominately in New York/New Jersey, Southern California, Northern California and Chicago, with a build-out potential of over 3.3 million square feet
“This transaction underscores the exceptional quality of DCT’s portfolio, platform and customer relationships, which our talented team has worked hard to create,” said DCT Industrial President and Chief Executive Officer Philip L. Hawkins. “Our shared commitment to quality, exceeding expectations and enhancing customer experience makes this a perfect combination.”
“DCT’s team is as good as it gets, and we expect a number to join us to help manage the portfolio, execute on capital deployment activities and make long-term contributions to the Prologis platform,” said Prologis CEO for the Americas Eugene F. Reilly. “This deal also diversifies our customer roster through the addition of some 500 new relationships.”
The transaction is anticipated to create substantial synergies, including near-term synergies of approximately $80 million in corporate general and administrative cost savings, operating leverage, interest expense and lease adjustments, which are forecast to increase annual stabilized core funds from operations (Core FFO) per share by 6 to 8 cents. A combination of revenue synergies and incremental development volume has the potential to generate $40 million of additional annual revenue and development profit in the future.
“This all-stock transaction enables us to maintain our strong balance sheet and significant financial flexibility,” said Prologis CEO Thomas S. Olinger. “In addition, the transaction increases our U.S. dollar net equity and drives additional core FFO growth.”
Under the terms of the agreement, DCT shareholders will receive 1.02 Prologis shares for each DCT share they own. The transaction, which is currently expected to close in the third quarter, is subject to the approval of DCT stockholders and other customary closing conditions. At closing, it is anticipated that Hawkins will join the Prologis board of directors.
J.P. Morgan is acting as exclusive financial adviser and Mayer Brown LLP is serving as legal advisor to Prologis. BofA Merrill Lynch is acting as exclusive financial advisor and Goodwin Procter LLP is serving as legal adviser to DCT.
