(Bloomberg) -- Prologis Inc., one of the world’s largest warehouse owners, has agreed to buy Liberty Property Trust in an all-stock transaction valued at $9.7 billion, extending its reach in markets such as Chicago, Houston and Southern California.
The transaction gives Liberty stakeholders 0.675 Prologis shares for each Liberty share they own, the companies said in a statement. That represents premium of about 21% based on Friday’s closing prices.
Warehouses and logistics facilities -- Liberty’s specialty -- have become a hot part of the real estate market as more shopping moves online and consumers demand quick shipping. Blackstone extended its bet on e-commerce last month, agreeing to buy Colony Capital Inc.’s warehouse unit for $5.9 billion.
Prologis itself has been a big acquirer of rivals in recent years.
“The deal solidifies that the quickest way to increase exposure to fast-rent-growing warehouses is through M&A,” said Bloomberg Intelligence analyst Lindsay Dutch.
Shareholder Land & Buildings Investment Management began pushing Liberty to consider selling itself about a year ago. The firm, led by Jonathan Litt, said last month that a “credible party” had contacted the real estate investment trust with an interest in buying it at $60 a share.
“The proposed sale of Liberty Property Trust to Prologis is a great example of maximizing value for all shareholders,” Litt said.
The pricing of the deal is similar to Prologis’s purchase of DCT Industrial Trust and its pending takeover of Industrial Property Trust, Dutch said, adding that Liberty would still be the biggest of the three transactions.
Including debt, the deal is valued at $12.6 billion. Prologis is buying a portfolio of 107 million square feet of logistics properties that’s owned or managed, as well as buildings under construction and land for future development. It also includes 4.9 million square feet of office space.
“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 Chief Executive Officer Hamid R. Moghadam said in the statement. “The strategic fit between the portfolios allows us to capture immediate cost and long-term revenue synergies.”
Prologis plans to dispose of approximately $3.5 billion of assets on a pro rata share basis, including $2.8 billion of logistics properties and $700 million of office properties.
Liberty shares have risen 21% this year, compared with the 55% jump in Prologis shares and a 45% gain for a Bloomberg index of industrial REITs.
Liberty may be required to pay a termination fee of as much as $325 million if the deal falls apart.
The transaction is expected to close in the first quarter of 2020. Bank of America Corp. and Morgan Stanley advised Prologis, while Goldman Sachs Group Inc. and Citigroup Inc. represented Liberty.
(Updates with quote from investor.)
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