The board of Segro, a prominent UK warehouse landlord, has unexpectedly reversed its stance regarding a £14 billion acquisition proposal from its larger US competitor, Prologis. In a significant development for the mergers and acquisitions landscape, Segro’s board unanimously endorsed Prologis’s revised offer, marking a pivotal moment in one of the largest foreign takeovers of a UK-listed company.
Segro’s Board Embraces Prologis’s Final Offer
In a statement released after the London stock market had closed, Segro announced its willingness to recommend that shareholders accept what Prologis described as its “best and final offer.” This announcement comes nearly a month after Segro initially dismissed a £12.6 billion bid from Prologis, alongside two subsequent proposals, highlighting a dramatic shift in the board’s outlook.
Prologis’s latest proposal values Segro at £10.32 per share, representing a 3.9% increase over its previous offer and a 9.5% rise from its initial bid disclosed in June. The revised terms also ensure that Segro shareholders will receive a permitted dividend, while the company has urged Prologis to commit to a secondary listing on the London Stock Exchange, further demonstrating its strategic intent.
Extended Deadline Provides Prologis More Time
Under the UK’s takeover code, Prologis was initially required to announce its intentions by 5pm UK time on Wednesday. However, this “put up or shut up” (PUSU) deadline has now been extended by an additional three weeks, giving Prologis until 5pm on 12 August to solidify its offer. The California-based firm expressed its appreciation for the extension and its readiness to collaborate with Segro’s board to reach a mutually beneficial outcome.
Following the announcement, Prologis’s shares experienced a decline of up to 3% in New York trading before regaining some lost ground, reflecting the market’s cautious optimism regarding the deal.
Influence of Major Stakeholders on the Decision
Segro’s turnaround came in the wake of pressure from one of its significant investors, Norges Bank Investment Management, which holds a 1.3% stake in Prologis and an 8.3% stake in Segro. Norges encouraged Segro to engage constructively with Prologis, recognising the strategic advantages of a merger.
Segro, originally established in 1920 as the Slough Trading Company, has evolved significantly over the decades. Today, it boasts a portfolio that includes 10.9 million square metres of space across Europe, accommodating a diverse range of tenants. Notably, its Slough trading estate is now home to one of the world’s largest collections of data centres, a trend that aligns with the increasing demand for digital infrastructure.
The Market Context and Future Implications
The proposed acquisition of Segro comes at a time when British companies are attracting heightened interest from overseas buyers. Since the onset of the Iran conflict, British stocks have become relatively more affordable compared to their US counterparts. This trend has led to a surge in deal-making activity, exemplified by the recent £10.6 billion acquisition of laboratory testing firm Intertek by a private equity firm linked to Sweden’s Wallenberg family.
As Segro’s shares have fluctuated, peaking during the Covid pandemic due to a spike in demand for warehouse space, the company has faced challenges since spring 2022, leading to a 40% decline from its highs prior to Prologis’s initial offer. Chief Executive David Sleath had previously characterised Prologis’s bids as “opportunistically timed,” asserting that Segro could deliver strong returns to its shareholders through its development pipeline.
Why it Matters
This potential acquisition underscores the growing trend of foreign investment in UK companies, reflecting broader economic dynamics and the strategic shifts within the logistics sector. The move could reshape the competitive landscape of warehouse management and real estate in the UK, particularly as demand for logistics solutions continues to surge in the wake of evolving consumer behaviours. As the negotiations progress, stakeholders will be keenly watching how this deal could influence market conditions and investment strategies in the future.
