Global logistics real estate company Prologis, Inc. and Liberty Property Trust announced the companies would merge this week. Prologis will acquire Liberty in an all-stock transaction that is valued at $12.6 billion, including the debt assumption. Prologis’ board of directors and Liberty’s board of trustees unanimously approved the deal, which is expected to close in the first quarter of 2020.
“Liberty’s logistics assets are highly complementary to our U.S. portfolio and this acquisition increases our holdings and growth potential in several key markets,” Prologis chairman and CEO Hamid R. Moghadam said in a statement. “The strategic fit between the portfolios allows us to capture immediate cost and long-term revenue synergies.”
The merger will enhance Prologis’ presence in target markets like Lehigh Valley, Chicago, Houston, central Pennsylvania, New Jersey and southern California.
Prologis’ Liberty Property Trust acquisition comprises of:
• 107 million square foot logistics operating portfolio; 87 percent overlap with key markets
• 5.1 million square feet of logistics development in progress
• 1,684 acres of land for future logistics development with build-out potential of 19.7 million square feet
• 4.9 million square foot office operating and development portfolio
Prologis plans to dispose of about $3.5 billion of assets on a pro rata share basis. This includes $2.8 billion of non-strategic logistics properties and $700 million of office properties.
“Liberty and Prologis represent two of the finest teams of real estate professionals and two of the finest portfolios of industrial real estate ever assembled,” Bill Hankowsky, Liberty chairman and chief executive officer said in a statement. “The joining of these two platforms at this moment, when industrial logistics has become so pivotal to the new economy, will further the industry’s ability to support the nation’s supply chain and enhance value creation for our combined shareholders. It is a testament to Liberty’s outstanding teams of professionals, both present and past.”
“Liberty’s high-quality logistics real estate will strengthen our portfolio as well as our customer roster,” added Prologis chief investment officer Eugene F. Reilly. “We are also excited about the caliber of talent at Liberty and expect a number of their employees to join us to help manage the portfolio and execute on capital deployment.”
This deal is expected to create immediate cost synergies of about $120 million from corporate general and administrative cost savings, operating leverage, lower interest expense and lease adjustments. Additionally, the acquisition could lead to future synergies that would create approximately $60 million in annual savings—$10 million from revenue synergies and $50 million from incremental development value creation.
“The execution of this transaction is further evidence of the strength of Prologis’ balance sheet and will create significant additional capital from the future sale of the non-core assets,” Prologis chief financial officer Thomas S. Olinger said in a statement. “The combination of these portfolios will drive incremental Core FFO growth and long-term shareholder value.”
Agreement terms state Liberty shareholders will receive 0.675 out of a Prologis share for each Liberty share they own. The transaction is still subject to Liberty shareholders’ approval and other customary closing conditions.