ProLogis on Monday said it would buy Catellus Development Corp. for $3.6 billion to form the largest U.S. real estate investment trust focused on warehouse and distribution properties.
The deal calls for Catellus shareholders to receive either $33.81 in cash or 0.822 share of ProLogis for each Catellus share. The terms dictate that 65 percent of Catellus shares will be swapped for cash and 35 percent for ProLogis stock.
Under the cash and stock prorations, the consideration is fixed at 56.7 million ProLogis shares and $1.255 billion in cash. The stock component of the consideration is expected to be tax-free to Catellus stockholders.
ProLogis, based in Denver, said the terms represent a premium of more than 16 percent over Catellus' closing price of $29.24 on the New York Stock Exchange on Friday. ProLogis shares closed at $41.37, also on the NYSE.
Including assumed liabilities and transaction costs, ProLogis said the deal would have a total value of $4.9 billion.
The combined company will have the world's largest network of distribution facilities, with over 350 million square feet in over 2,250 facilities owned, managed and under development in 75 markets in North America, Europe and Asia, ProLogis said. It will also have more than 100 million buildable square feet of potential development across its global markets.
The transaction is expected to boost ProLogis' estimated 2006 funds from operations -- a key measure of financial performance for REITs -- by 3 percent to 5 percent. Key drivers include the integration of Catellus' development operations into ProLogis' fund-management business, as well as significant savings in general and administrative costs.
Banc of America Securities acted as financial adviser to ProLogis, while Morgan Stanley advised San Francisco-based Catellus.
