Segro, the UK's largest commercial landlord, has rejected a £12.6bn takeover approach from US rival Prologis, with analysts and commentators urging shareholders to hold out for a higher price.
Bid Rejected as Too Low
Prologis's offer of 925p a share was dismissed by Segro's board as "a long way short of Segro's own views on value." The bid values the company at £12.6bn, but analysts note that 925p merely matches the per-share value of Segro's assets, the first valuation yardstick in property.
Segro shares were trading almost 25% below that price before the approach, but the company argues that its portfolio—comprising warehouses, logistics centres, and increasingly AI datacentres—warrants a premium.
Why Segro Is Different
Warehouses make up 35% of Segro's portfolio and are in high demand due to the growth of online shopping. More enticing is the AI datacentre opportunity: although datacentres represent only 8% of the portfolio currently, they have a heavier weighting in the development pipeline, with over 2.5GW of capacity planned. The skew towards the space-constrained south-east of England adds to the appeal.
Financially, Segro has delivered compound annual growth of 8% in asset value, earnings per share, and dividends over the past decade.
Discount to Asset Value
Prologis points out that Segro's shares have traded at an average 17% discount to asset value over the past three years. The all-share offer would allow Segro shareholders to switch into Prologis, a larger global group worth $130bn, with greater financial muscle to develop Segro's portfolio, including datacentres.
However, analysts argue that Segro shareholders already chose Segro for its 62%-38% UK-continental European balance and growing AI exposure. At Prologis, those assets would represent only a tenth of the whole.
Analysts Urge Resistance
Shore Capital stated: "Shareholders should demand a far better offer from Prologis for it to be taken seriously and control to be ceded." Panmure Liberum's analyst added: "The most significant takeaway is that the world's largest logistics REIT sees sufficient long-term value in [Segro's] platform to pursue a transaction at all."
This third-party endorsement should serve as a valuation prop if Segro survives the encounter. Not all of Wednesday's 17% share price rise should evaporate. There is no reason to roll over for another US bargain hunter.
