SEGRO (AO) | Hold | Rejects the offer from Prologis valuing the company at 925p

Research evidence excerpt

SEGRO (AO) | Hold | Rejects the offer from Prologis valuing the company at 925p

SEGRO Hold | Target Price: 780p

This is a credible strategic proposal: Prologis gains a scaled European platform, SEGRO gains access to a materially stronger

balance sheet and Prologis’ public/private capital ecosystem. That matters for SEGRO’s development, power and data-centre

pipeline, where funding capacity can be as valuable as the sites themselves. The European portfolios are also complementary

enough that meaningful overhead, procurement and development synergies should be achievable, while antitrust risk should be

manageable given the fragmented nature of logistics real estate outside a handful of local submarkets. Prologis is also making a

strong case pertaining to the undervaluation of the asset respective to its NTA. The market was valuing SEGRO at a discount to the

estimated value of its net assets. Prologis’ 925p proposal offers a 24.6% premium to that discounted market price, but only brings

shareholders back to stated NAV, which is probably why SEGRO’s board of directors decided to reject the offer (pending

confirmation by SEGRO’s expected statement). SEGRO’s existing stabilised logistics portfolio is what broadly supports reported

EPRA NTA. The development pipeline, power-secured land and data-centre opportunities are what should justify paying above

NTA. At 925p, Prologis is effectively paying for the appraised value of the portfolio as reported. The pipeline is the principal reason

Prologis believes it can create value after closing. Paying 925p removes that listed-market discount, but it does not necessarily

compensate shareholders for surrendering control of a scarce European logistics platform, its development land bank and its

power/data-centre optionality.