Friday, January 28, 2011

ProLogis, AMB in merger talks as truce with GLP nears expiry

(SINGAPORE) A month to the expiration of the non-compete agreement between Global Logistic Properties (GLP) and US-based ProLogis that prevents the latter from re-entering the lucrative China market after its exit in 2008, ProLogis appears to be gearing up for a homecoming in the country.

The development could potentially revive questions on GLP's decision not to explicitly disclose its non-compete agreement with ProLogis in its prospectus when it sought a listing on the Singapore Exchange (SGX) main board last year. GLP has always stated that China is its key growth market.

ProLogis, the world's largest warehouse operator, confirmed yesterday morning that it was in merger talks with another big player, AMB Property Corp - a US-listed firm that is a major logistic facilities provider in China.

ProLogis and AMB said yesterday that their discussions involve a merger of equals, where the two companies would combine in an all-stock, at-market transaction based on trading prices of the two firm's stocks prior to media reports on the possible merger.

The talks were first reported by the Wall Street Journal before the US markets closed early yesterday morning. If successful, it could create a US$14 billion real estate investment trust (Reit) with US$23.7 billion of total assets - the most among office and industrial Reits tracked by Bloomberg.

When contacted about the possible merger between the two largest US-listed owners of logistics facilities and ProLogis' re-entry in China, a GLP spokesman said: 'We always monitor developments in the logistics property space.

'Scale and network are critically important in this business, so consolidation among the global logistics property players is par for the course.'

After news broke in December about the non-compete clause it has with ProLogis, GLP had repeatedly said that the information was 'not material' and did not need to be disclosed. It also said that it regarded ProLogis 'in the same manner as any other potential competitor with no presence in China'.

Sources close to GLP also told the media that the company had felt chances of ProLogis re-entering China when the non-compete clause expires next month was 'remote'.

Under the non-compete arrangement, ProLogis cannot acquire or build logistic facilities in China, and GLP in Japan. The clause stems from ProLogis' sale of all its China operations and property fund interest in Japan to GIC Real Estate (GIC RE) in late 2008 for US$1.3 billion.

GIC RE, the property investment arm of the Government of Singapore Investment Corporation, then rebranded the assets under the GLP name.

Much of GLP's current portfolio was acquired from ProLogis when it exited China amid a mountain of debt.

According to GLP's listing prospectus, AMB's completed portfolio in China amounts to 400,000 square metres. It is the fourth largest player in China, with GLP in No 1 position with 2.8 million sq m.

GLP was listed on the SGX in October last year, where it raised S$3.9 billion in its initial public offering - the largest since Singapore Telecom's listing.

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