GMG Goodman Group

U.S. industrial real-estate giant ProLogis (PLD) said Thursday it plans to make an offer for ProLogis European Properties (PEPR.AE) that values the Euronext-listed warehouses developer at about EUR1.2 billion ($1.73 billion), with analysts saying the bid will likely triumph over interest from a rival group.

The Denver-based company said it will launch a takeover offer for ProLogis European worth EUR6.10 per share, after it raised its stake in the biggest owner of warehouses in Europe to about 38% by buying around 11 million ordinary shares from Third Avenue Management LLC.

The offer represents a 22% premium over the closing share price April 12 when Australian property investor Goodman Group (GMG.AU) and Dutch pension-fund asset manager APG Algemene Pensioen Groep NV had a joint takeover bid for ProLogis European rejected.

ProLogis Chief Executive Walter Rakowich told Dow Jones Newswires that its offer was "a compelling proposition" that would "provide liquidity to all shareholders that want it."

ProLogis said its offer is at an attractive price and eliminates instability and uncertainty created by the rival group's indicative offer for its own stake, which previously stood at 33.1%. Goodman and APG were prepared to offer ProLogis EUR6 per share, which valued ProLogis European at about EUR1.1 billion.

Rakowich added the company was making "a concrete offer with no material contingencies" and said its rival bidders had presented a non-definitive and highly conditional proposal. APG told Dow Jones Newswires that it would make a statement after studying the ProLogis offer.

The bid from ProLogis was likely to be successful according to Martijn ter Laak, a real estate analyst at Rabobank. He said the offer created an exit opportunity for APG, which it probably would consider fair value, and means a counterbid in conjunction with Goodman was very unlikely.

Despite the consortium still having room to increase its offer, analysts at ABN Amro agreed that there was little likelihood of a raised bid as the conditions of ProLogis handing over its stake and management contract would probably remain. ABN Amro raised its ProLogis European price target to EUR6.10, the level of the new bid, and maintained its reduce rating.

Goodman's status as a competitor in Europe also means it wouldn't make strategic sense for ProLogis to sell its management stake in ProLogis European, ter Laak said. Rabobank increased its ProLogis Europe price target to EUR6.10 and reiterated its hold rating.

Investors and analysts have complained about a weak corporate-governance structure at ProLogis European that puts small shareholders at a significant disadvantage. Investors with less than a 20% holding have no powers to call general meetings or make proposals to the board. ProLogis can't be replaced as manager before 2016 and the company has reaffirmed that it plans to retain both its ownership in and management deal with ProLogis European.

Michael Winer, portfolio manager at Third Avenue Management, told Dow Jones Newswires that the deal it struck with ProLogis at EUR6.10 a share was "right in line with our valuation," given that it sees an uncertain industrial property market on the continent.

"It was interesting to see APG's proposal was the catalyst for ProLogis to make their move," Winer added. "They created a buzz and forced ProLogis to act before they wanted to."

ProLogis European had a portfolio with a market value of EUR2.8 billion at the turn of the year. It consisted of 232 buildings across 11 countries, covered 4.9 million square meters, and had an occupancy level of 94.5%. At 1530 GMT, its shares traded up 8.7% at EUR6.25.

The deal activity around the company comes as ProLogis and U.S. rival AMB Property Corp. (AMB) enter the final stages of their effort to close a $14 billion merger that would form a global real-estate powerhouse with gross assets of $46 billion. At 1530 GMT, ProLogis shares traded up 0.7% at $15.69.

-By Michael Haddon, Dow Jones Newswires; 4420-7842-9289; michael.haddon@dowjones.com

(Patrick Buis in Amsterdam contributed to this article.)

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