By Joshua Burd
Prologis Inc. will add nearly 10 million square feet to its New Jersey portfolio after agreeing to acquire Duke Realty Corp., in an all-stock, $26 billion transaction that spans more than 150 million square feet of combined industrial space in 19 major U.S. markets.
The blockbuster merger, announced Monday morning, will grow Prologis’ footprint in the state by 21 percent and strengthen its presence in what is already one of its top locations. The overall deal also includes 11 million square feet of in-progress development valued at some $1.6 billion and 1,228 acres of land owned and under option with a build-out of roughly 21 million square feet, although it was not immediately clear how much of that pipeline is in New Jersey.
Duke Realty, which is based in Indianapolis, has become a key player in the booming industrial sector, having shed a sprawling office portfolio to focus purely on logistics space. The company made its entrance to New Jersey in 2013, purchasing three buildings in Cranbury and Logan Township with a combined 1.3 million square feet, while developing a three-building, 1.1 million-square-foot industrial park in Linden as its first ground-up project in the state.
“We have admired the disciplined repositioning strategy the Duke Realty team has completed over the last decade,” said Hamid R. Moghadam, co-founder, chairman and CEO of San Francisco-based Prologis. “They have built an exceptional portfolio in the U.S. located in geographies we believe will outperform in the future. That will be fueled by Prologis’ proven track record as a value creator in the logistics space. We have a diverse model that allows us to deliver even more value to customers.”
The respective boards of directors for Prologis and Duke Realty have unanimously approved the merger, the companies said Monday. With the transaction, which comes after the latter rejected an initial $24 billion offer, Prologis is gaining market share in key geographies including Southern California, New Jersey, South Florida, Chicago, Dallas and Atlanta.
The real estate investment trust plans to hold some 94 percent of the Duke Realty assets and exit one market, according to a news release. It was unclear how the deal will impact the companies’ respective teams in New Jersey, although Prologis said in a presentation that it would “hire a number of Duke Realty personnel.”
“This transaction is a testament to Duke Realty’s world-class portfolio of industrial properties, long-proven success and sustainable value creation we’ve delivered over the years,” said Jim Connor, Duke’s chairman and CEO. “We have always respected Prologis, and after a deliberate and comprehensive evaluation of the transaction and the improved offer, we are excited to bring together our two complementary businesses.
“Together, we will be able to accelerate the potential of our business and better serve tenants and partners. We are confident that this transaction — including the meaningful opportunity it provides for shareholders to participate in the growth and upside from the combined portfolio — is in the best long-term interest of Duke Realty shareholders.”
Under the terms of the deal, Duke shareholders will receive 0.475 of a Prologis share for each Duke Realty share they own. The merger, which also includes the assumption of debt, is slated to close in the fourth quarter and subject to the approval of both sets of shareholders and other customary closing conditions.
Goldman Sachs Group Inc. and Citigroup are serving as financial advisers to Prologis and Wachtell, Lipton, Rosen & Katz as its legal adviser. Morgan Stanley & Co. LLC is serving as the lead financial adviser and Hogan Lovells US LLP is serving as legal adviser to Duke Realty, while J.P. Morgan Securities LLC and Alston & Bird LLP are also serving as financial and legal advisers, respectively, to the company.
Duke Realty eyes continued expansion with projects in New Jersey’s top industrial markets
