Prologis Raises Segro Takeover Bid to £14 Billion, Calls It Final

Prologis wants Segro, enough to keep raising its bid four times in a month.

The San Francisco-based warehouse giant announced Wednesday what it's calling its "best and final" proposal for the British logistics landlord: 0.0920 new Prologis shares for every Segro share, valuing the FTSE 100 company at roughly £14 billion, or about $18.8 billion, according to Reuters. That works out to 1,031.7 pence per Segro share.

Prologis also sweetened the cash option. Segro shareholders can now take up to £3.5 billion of the deal in cash, fixed at 1,031.7p per share, instead of stock, according to Alliance News.

This is the fourth version of this offer. Prologis first went public with its interest back in June, valuing Segro near £12.6 billion, or 925p a share, according to Alliance News. Segro's board rejected it. Prologis came back with a bigger number. Segro rejected that too. On Monday, July 20, Prologis raised again to 993p a share. Segro said no to that one as well, according to Reuters.

Now it's Wednesday, and Prologis is done negotiating, at least on paper. "The Best and Final Proposal is final and will not be increased," the company said in its statement, though it left itself an out: it could still raise the offer under limited exceptions allowed by the UK's Takeover Code, according to Stock Titan.

Why the rush

There's a deadline. Under UK takeover rules, Prologis faced a 5pm BST "put up or shut up" cutoff Wednesday, July 22, to either make a firm offer or walk away for six months, according to Stock Titan. Prologis is asking Segro's board to request an extension from the UK Takeover Panel so the two sides have more time to hammer out a recommended deal on these terms.

Whether Segro agrees to ask for that extension is an open question. As of Wednesday morning, the company hadn't said.

The market reaction

Segro shares jumped more than 4% Wednesday, trading around 904.60p to 907p in London, according to Alliance News and Reuters. That's still well below the 1,031.7p offer price, suggesting investors aren't fully convinced this deal closes, or that a higher number could still materialize.

Prologis says its latest number is a roughly 45% premium over Segro's closing share price on June 23, the day before Prologis first went public with its interest, according to Reuters. The company also frames it as a 14% premium to Segro's pro forma adjusted net asset value and a 39% to 46.6% premium over recent volume-weighted average prices, according to Stock Titan's release of the terms.

Who's pushing for a deal

Segro's board has been defiant through three rounds of rejections, arguing its own standalone growth strategy is the better bet for shareholders, according to Alliance News. But not everyone holding Segro stock agrees with that stance.

Norges Bank Investment Management, which holds an 8.3% stake in Segro, publicly called on both boards Tuesday to sit down and negotiate seriously, according to Alliance News. Reuters reported that APG Asset Management and CCLA Investment Management also urged the two companies to engage, saying a combination could create real value.

A Segro spokesperson told Reuters the company met with Prologis over the weekend and said it "would consider and engage again on a revised proposal." That statement went out shortly before Prologis announced its improved bid Wednesday, suggesting there's more room here than Segro's public rejections might imply.

What happens to Segro shareholders if this closes

If the deal goes through with the cash option fully subscribed, existing Segro shareholders would end up owning about 8.9% of the combined Prologis, according to both Alliance News and Stock Titan. Prologis has also said it would look into a secondary listing of its shares on the London Stock Exchange if there's enough investor demand for one.

What's unresolved

Segro hadn't formally responded to the Wednesday offer as of this writing, and it's unclear whether the board will ask the Takeover Panel for the deadline extension Prologis wants. If Segro doesn't seek that extension and doesn't accept the offer, UK rules would generally bar Prologis from coming back with another bid for six months. Segro's board, which has argued its standalone plan serves shareholders better than a sale, will need to explain to investors like Norges Bank why £14 billion and a nearly 45% premium isn't enough, if that's still the board's position by the end of the day.