Logistics powerhouse Prologis is buying DCT industrial trust for $8.4 billion.
The two companies announcement a stock-for-stock trade, including the assumption of debt, for the 71 million square foot operating portfolio.
“For some time, we have considered DCT’s realigned portfolio to be the most complementary to our own in terms of product quality, market position and growth potential,” said Prologis chairman and CEO Hamid R. Moghadam.
“This high level of strategic fit will allow us to capture significant scale economies immediately. In addition, our current platform initiatives, particularly in the areas of advanced analytics, customer experience and procurement and ancillary revenues, will enable us to extract significant upside from the combined portfolios.”
The portfolio deepens Prologis’ presence in high-growth markets including Southern California, the San Francisco Bay Area, New York/New Jersey, Seattle and South Florida.
The acquisition also includes 7.1 million square feet of development, redevelopment and value-added projects; 195 acres of land in pre-development, predominantly in Seattle, Atlanta, South Florida and Southern California with build-out potential of over 2.9 million square feet and 215 acres of land under contract or option, predominately in New York/New Jersey, Southern California, Northern California and Chicago, with a build-out potential of over 3.3 million square feet.
“This transaction underscores the exceptional quality of DCT’s portfolio, platform and customer relationships, which our talented team has worked hard to create,” said DCT Industrial president and CEO Philip L. Hawkins.
“DCT’s team is as good as it gets, and we expect a number to join us to help manage the portfolio, execute on capital deployment activities and make long-term contributions to the Prologis platform,” said Prologis chief executive officer for the Americas Eugene F. Reilly. “This deal also diversifies our customer roster through the addition of some 500 new relationships.”
The deal is expected to create $80 million in corporate general and administrative cost savings, operating leverage, interest expense and lease adjustments.
A combination of revenue synergies and incremental development volume has the potential to generate $40 million of additional annual revenue.
“This all-stock transaction enables us to maintain our strong balance sheet and significant financial flexibility,” said Prologis chief financial officer Thomas S. Olinger. “In addition, the transaction increases our U.S. dollar net equity and drives additional core FFO growth.”
Under the terms of the agreement, DCT shareholders will receive 1.02 Prologis shares for each DCT share they own.