AMB-PLD Merger Finally Comes Through - Analyst Blog
02 Juin 2011 - 4:30PM
Zacks
In a significant development in the
industrial REIT (real estate investment trust) market, shareholders
of both ProLogis (PLD) and AMB Property
Corp. (AMB) has agreed to a 'merger of equals' to create a
behemoth of sorts in the industrial real estate sector. The
all-stock deal is expected to close on June 3, 2011, after
erstwhile ProLogis shares are delisted from NYSE with the close of
trading hours on June 2, and the combined company (renamed as
ProLogis Inc.) begins trading on the NYSE under the ticker symbol
PLD.
According to the terms of the
agreement, each ProLogis share will be converted into 0.4464 of a
newly issued AMB share, and the combined company will be treated as
an UPREIT – an innovative business structure that forms an umbrella
partnership between property owners and REITs. The combined entity
would have a pro-forma equity market capitalization of
approximately $15.7 billion.
The merged entity brings two of the
most complementary customer franchises on the same platform in
industrial real estate market and creates a $46 billion worth of
asset pool at their disposal. The combined portfolio spanning
approximately 600 million square feet of modern distribution
facilities is located in key gateway markets and logistics
corridors of 22 countries across the globe.
Both the companies have a
significant presence in North America, Western Europe and Japan.
While ProLogis is relatively strong in the U.K., Central and
Eastern Europe, AMB has a considerable presence in China and
Brazil.
The merger would lead to potential
cost savings through operational synergies and would help create a
stronger platform for value creation and sustainable growth. The
transaction is expected to be accretive with immediate effect.
According to an earlier
announcement, ProLogis expects the merger to result in
approximately $80 million in annual gross G&A savings upon full
integration. With the merger, the private capital business of both
the companies is also expected to snowball, elevating it to a
market leading position with a broad range of product offerings
across the major markets, including the Americas, Europe and Asia
and across the broad risk-return spectrum.
Both the CEOs of AMB and ProLogis
will serve as co-CEOs through December 31, 2012, after which the
CEO of erstwhile AMB will become the sole CEO of the combined
company. The merged company's corporate headquarters will be
located in San Francisco, while its operational headquarters will
be located in Denver.
With the merger, former ProLogis
shareholders will hold approximately 60% of the combined company's
equity, while former AMB shareholders will hold the balance 40%.
The combined entity will boast of unrivaled high-quality
geographically well-located assets. The potential 'merger of
equals' would arguably create a leading global provider of
logistics real estate, serving multi-market customers with both
existing world-class facilities and unmatched development
capabilities.
The merged entity is expected to
have the strongest balance sheet in the sector with ample liquidity
and a spread-out debt maturity schedule that reduces pressure for
repayment. The transaction is a win-win deal for both the
participating companies and would remain as the first biggest deal
since recession (involving publicly traded REITs) of this echelon
in the real estate history.
We presently have a 'Neutral'
rating on both ProLogis and AMB, which currently enjoy a Zacks #3
Rank that translate into a short-term 'Hold' recommendation
indicating that the stocks are expected to perform in line with the
overall U.S. equity market for the next 1–3 months.
AMB PROPERTY CP (AMB): Free Stock Analysis Report
PROLOGIS (PLD): Free Stock Analysis Report
Zacks Investment Research
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