Segro Rejects Prologis' Sweetened $18.2 Billion Bid

UK industrial real estate giant Segro Plc (SGRO) announced it has unanimously rejected an improved third takeover offer from US-based Prologis Inc. (PLD), valued at approximately $18.2 billion. The London-listed company stated that its board believes its standalone growth strategy and future prospects offer superior value to shareholders. However, Segro also indicated that it remains open to engaging with Prologis should a further improved offer be made.

Prologis' latest proposal, submitted on July 16 and rejected on July 17, included 0.0890 new Prologis shares for each Segro share, alongside a partial cash alternative of up to £2.7 billion, representing 20% of the total offer. This offer represented a 34% premium to Segro's closing share price on June 23, before Prologis' initial approach was made public. Prologis had made a second proposal on July 10, which was rebuffed on July 12. Segro's board had previously characterized Prologis's bids as 'opportunistically timed' to take advantage of a 'dislocated share price' and geopolitical turmoil.

Segro Chairman Andy Harrison stated that the board does not believe Prologis's latest proposal reflects the 'quality, scarcity, or long-term prospects of Segro's portfolio and platform.' In response, Prologis maintained that its third offer is 'compelling for both sets of shareholders' and urged Segro shareholders to encourage their board to recommend the combination. Prologis also mentioned that it would consider a secondary listing of its shares on the London Stock Exchange if the deal were to proceed.

Following the rejection, Segro's shares (SGRO) fell by 1% to 2.2% in London trading. Nevertheless, Segro's stock had gained nearly 21% since Prologis's interest became public on June 24. Prologis shares (PLD) also saw a slight decline in premarket/early US trading. Analysts noted that Segro's rejection was 'hardly surprising' given its effectively anchored valuation expectations at a higher level.

This takeover battle unfolds amidst a wave of transatlantic dealmaking and London-listed companies delisting or becoming targets for foreign buyers. Recently, companies like Ashtead and Flutter Entertainment have canceled their main London listings, while easyJet and Tate & Lyle have been subject to potential takeover agreements. For Prologis, this potential acquisition would have been its largest since the $26 billion (including debt) takeover of Duke Realty in 2022, and it aligns with its strategy to expand its data center footprint.

Under UK takeover rules, Prologis has until 5:00 PM London time on Tuesday, July 22, to either announce a firm intention to make an offer or walk away. Market observers suggest that despite Segro's board urging shareholders to take no action, some shareholders are becoming more vocal in advocating for the board to engage further with Prologis. Analysts speculate that a deal could be struck around 1,110 pence per share, but also caution that Segro's management is 'well able to realise the value inherent in its portfolio.'