The $12.6 Billion Deal Includes Debt

Prologis and Liberty Property Trust announced a merger between the two firms. According to deal terms, Prologis will acquire Liberty $12.6 billion, including the assumption of debt. The board of directors of both REITs approved the transaction.

The transaction deepens Prologis’ presence in target markets like Lehigh Valley, Chicago, Houston, New Jersey and Southern California.

Prologis CIO Eugene F. Reilly commented on the merger in a press release. “Liberty’s high-quality logistics real estate will strengthen our portfolio as well as our customer roster,” he said. “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.”

Details of the Prolongis-Liberty Trust Deal

This transaction will likely create immediate cost savings of approximately $120 million. This figure includes money from corporate general and administrative cost savings, operating leverage, lower interest expense and lease adjustments. Initially, this transaction is expected to increase annual core funds from operations per share by $0.10-$0.12. Upon stabilization of the acquired development assets, completion of the planned non-strategic asset sales and redeployment of the related proceeds, annual stabilized Core FFO per share is forecasted to increase by an additional $0.04 per share for a total of $0.14-$0.16.

“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 CEO said. “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.”

Further, there are future savings with the potential to generate approximately $60 million in annual savings, including $10 million from revenue synergies and $50 million from incremental development value creation.

Finally, Liberty shareholders will receive 0.675x of a Prologis share for each Liberty share they own. The deal should close at the end of the Q1 2020. Liberty shareholders still need to approve the deal.

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