Segro Rejects $12.6 Billion Takeover Offer from US Rival Prologis

The board of Segro, a major UK warehouse and data center operator, has unanimously rejected a takeover proposal from its US-based competitor, Prologis. The offer, put forward on June 16 and rejected on June 23, was valued at 925 pence per share, totaling £12.6 billion.

Prologis, the world's largest logistics real estate investment trust, publicly disclosed its approach after Segro's board turned down the initial proposal. Prologis stated that the combination would "unlock the significant embedded value of Segro’s development and data centre pipeline" and that Segro shareholders would own approximately 10.5 percent of the combined entity.

Segro, however, contended that the proposed offer "falls a long way short of Segro’s own views on value." The company characterized the bid as "opportunistically timed," suggesting it exploited a "clear dislocation between Segro’s current share price and its highly attractive underlying business and strong prospects." Segro's shares had previously peaked above 1400p in 2021 but had fallen to around 600p last year, though they rose as much as 20 percent to 892p on Wednesday following the news of the bid.

This rejection comes amid a broader trend of increased overseas bids for UK companies. Analysts note that the London stock market is becoming a "hunting ground" for foreign investors, partly due to lower valuations of UK-listed stocks compared to international markets. Factors such as a weakening pound against the dollar and political uncertainty in the UK are also cited as contributing to this trend.

Other FTSE 100 firms have recently accepted foreign takeover bids, including Schroders, Lloyd's of London insurer Beazley, and laboratory testing group Intertek. Energy firm DCC is also expected to be acquired by a foreign buyer. Additionally, aerospace supplier Senior, ingredients maker Tate & Lyle, and William Hill owner Evoke have all succumbed to takeover offers. In a similar rebuff this week, Easyjet rejected a £4.7 billion offer from US investment fund Castlelake, accusing the fund of attempting to acquire the airline "on the cheap."

Experts suggest that the bid for Segro could signal further interest in other UK property companies and real estate investment trusts (REITs). While Segro is a significant player in the UK REIT market, it is considerably smaller than Prologis. The potential for such a merger raises questions about the broader sector's attractiveness to larger, international companies.

The ongoing wave of takeover activity is contributing to a potential record year for dealmaking. However, it also fuels concerns about the vulnerability of undervalued British companies to foreign acquisition and the long-term implications for the standing of the London stock market, especially in light of fewer new listings and existing companies moving to other exchanges.