SEGRO Board Unanimously Rejects Prologis Bid
The board of SEGRO, one of Britain's largest warehouse landlords, has unanimously rejected a £9.1 billion takeover approach from US rival Prologis. The offer, which valued SEGRO at 880 pence per share, was deemed to 'fundamentally undervalue' the company and its future potential, according to a statement released on Wednesday.
SEGRO's shares rose 3.2% to 891 pence in early trading following the announcement, indicating that investors believe a higher bid may be forthcoming. The company, which owns and manages warehouses across the UK and Europe, said it had 'carefully considered' the proposal with its financial advisers before concluding it was not in the best interests of shareholders.
Details of the Offer and Rationale for Rejection
The all-share offer from Prologis, the world's largest industrial real estate investment trust, represented a premium of about 5% to SEGRO's closing price on the day before the approach. However, SEGRO argued that the offer failed to reflect the strength of its portfolio, which includes prime logistics assets in key locations such as London, the Midlands, and major European cities.
SEGRO chairman David Sleath said: 'The board believes that SEGRO's unique portfolio, strong occupational demand, and development pipeline position the company for significant long-term value creation. The proposal from Prologis does not adequately recognise this potential.' The company also highlighted its track record of delivering double-digit earnings growth and a strong balance sheet.
Market Reaction and Potential for Increased Offer
Analysts at Jefferies noted that the rejection could prompt Prologis to return with a higher bid, given the strategic fit between the two companies. 'A combination would create a European logistics powerhouse with unparalleled scale and diversification,' they wrote in a note to clients. Prologis, which has a market capitalisation of over $100 billion, has been expanding aggressively in Europe amid booming demand for warehouse space driven by e-commerce growth.
SEGRO's portfolio spans 9.6 million square metres across 10 countries, with a focus on big-box warehouses serving retailers and logistics companies. The company reported a 12% increase in passing rent in its latest half-year results, reflecting strong rental growth and low vacancy rates. Prologis has declined to comment on the rejected offer.
Regulatory and Strategic Considerations
The proposed deal would have faced scrutiny from UK competition authorities, as the combined entity would control a significant share of the UK warehouse market. SEGRO's rejection may also reflect concerns about the terms of an all-share offer, which would expose shareholders to Prologis's stock performance and potential currency risks.
The UK warehouse sector has seen a wave of consolidation in recent years, driven by the surge in online shopping and the need for modern logistics facilities. Rivals such as Tritax Big Box REIT and LondonMetric Property have also been targets of merger interest. SEGRO's decision to reject the offer underscores its confidence in its standalone strategy, which includes expanding its development pipeline and capitalising on urban logistics trends.
