AMB-ProLogis Marriage Marks Biggest Industrial Real Estate Deal in U.S. in 20 Years

 SAN FRANCISCO and DENVER---A cool $8.7 billion in stock. That is the price San Francisco, CA-based AMB Property Corp. (NYSE: AMB) has agreed to pay for Denver, CO-based ProLogis (NYSE: PLD).

Analysts say the deal between  the two largest U.S. owners of warehouse and distribution centers is the biggest in the industrial real estate market in at least 20 years.

The deal is expected to close in the second quarter. It was publicly announced Jan. 31.

The deal comes as ProLogis, the larger company, continues to struggle with a hefty debt load.  Analysts say the deal will give AMB, which also operates in China and Brazil, a large presence in the UK and Eastern Europe

In a prepared statement, the companies jointly state that combined, they are expected to have a pro forma equity market capitalization of about $14 billion, a total market capitalization over $24 billion, and gross assets owned and managed of about $46 billion.

The companies will own or manage a total 600 million square feet of industrial space in  22 countries. The new company will retain the ProLogis name and will trade under the ticker symbol PLD (NYSE).

The companies say the all-stock merger is intended to be a tax-free transaction.

Both companies have substantial portfolios in North America, Western Europe and Japan. ProLogis is well-established in the United Kingdom and Central and Eastern Europe, and AMB has a significant presence in China and Brazil. 

"This merger is about two great companies coming together to create a stronger platform for sustainable value creation and growth,” Hamid R. Moghadam (top right photo) , AMB CEO said in the companies’ news release

“By joining forces, this merger will create a company positioned to be the leading global provider of logistics real estate — a Blue Chip REIt.”   

ProLogis CEO Walter C. Rakowich (top left photo) added, "This combination will help create the most efficient, effective industrial real estate organization with the best, most diverse talent.

"The merger of these two leading industrial platforms will advance a number of priorities already underway at each company.

“These priorities include improving efficiency and reducing costs by better aligning our portfolios through the reduction of non-core assets and the recycling of capital into higher growth opportunities; increasing asset utilization by stabilizing the operating portfolio; leasing up the development portfolio; and monetizing the land bank."

Moghadam, AMB's CEO, and Rakowich, ProLogis' CEO, will serve as co-CEOs through December 31, 2012, at which time Rakowich will retire, and Moghadam will become sole CEO of the combined company.

 Moghadam also will be Chairman of the Board of the combined company and will be primarily responsible for shaping the company's vision, strategy and private capital franchise.

Rakowich will be principally responsible for operations, integration of the two platforms and optimizing the merger synergies.

Until December 31, 2012, Rakowich also will serve as Chairman of the Board's executive committee.

William E. Sullivan (middle right photo), current ProLogis CFO, will continue to serve as CFO and will retire from ProLogis on December 31, 2012.

During this period, Thomas S. Olinger (lower left photo), AMB's current CFO, will be responsible for day-to-day integration activities and report to the CEOs; he will become the CFO of the combined company on December 31, 2012. 

The board of directors of the combined company will consist of six board members designated by ProLogis and five board members designated by AMB.

Irving F. "Bud" Lyons, III, (lower right photo) an existing ProLogis Board member, will serve as Lead Independent Director.

Following the close of the transaction, the combined company's corporate headquarters will be located in San Francisco, and the combined company's operations headquarters will be located in Denver.