Real estate firm Prologis has made an unsolicited offer to acquire UK real estate firm Segro.

Both traditionally known for industrial real estate developments, the companies have a sizable data center portfolio and are both looking to expand further into digital infrastructure.

Prologis looks to buy Segro, unlock data center potential

Prologis made an all-share proposal to acquire the entirety of Segro earlier this month, in a deal which would value the latter company at around £12.6 billion ($16.bn).

In its announcement of the proposal, Prologis said the deal would “unlock the significant embedded value of Segro’s development and data center pipeline in a way that Segro will not be able to do on a standalone basis.”

Segro’s board this week, however, rejected the offer, saying the offer undervalued the company. Segro’s market cap is currently £11.88 billion, though its share value has jumped significantly (from around £743 to £877) this week in the wake of the offer.

Despite the rebuttal, Prologis has published details of the proposal and hopes Segro shareholders will “encourage” the board to allow a binding offer to be put to a shareholder vote, if another offer is made.

“Prologis believes that the combination is a highly compelling opportunity for Segro shareholders,” Prologis said. “Segro shareholders would receive shares in the world’s largest logistics REIT with a $140.9 billion market capitalization, unlocking, on closing, significant upside to the current share price.”

Following completion of the proposed combination, Segro shareholders would hold approximately 10.5 percent of Prologis’ issued share capital.

Prologis continued: “The combination provides Segro shareholders with participation in a global platform with a track record of outperformance across key metrics and the successful integration of major corporate transactions with the delivery of synergies.”

In its own announcement, Segro said it “unanimously and unequivocally” rejected the proposal, which “falls a long way short” of the company’s own views on its value.

Segro said it believed that the offer was “opportunistically timed” and “sought to take advantage of the clear dislocation” between the company’s current share price and its potential value, based on its assets and future prospects.

“Segro has a clear strategy, supported by a strong balance sheet and a proven operating platform,” Segro said. “Momentum is building in Segro’s occupational markets, and the company has a large and attractive development pipeline, including an exceptional data center platform, as well as a long track record of delivery. Accordingly, the board remains very confident in Segro’s ability to capture substantial value for its shareholders during the coming years.”

Two real estate giants look to combine to further data center ambitions

With roots back to 1983, Prologis is a real estate investment trust focusing on logistics and industrial real estate. The NYSE-listed company says it has some 5.6GW of power committed by utilities or in advanced stages of negotiations and is targeting up to 10GW of capacity over the next ten years.

The company has current and planned data center developments in Illinois, Virginia, Georgia, California, Indiana, Ohio, Pennsylvania, and Texas in the US, as well as Paris, France, and Toronto, Canada. Some of these projects are being developed in partnership with US data center firm Skybox.

Segro, meanwhile, is a LSE-listed real estate investment trust and a major owner of data centers in the UK. Founded in 1920 and traditionally known for its industrial warehouse developments, Segro has been providing powered shells to data center customers for around 20 years, mostly centered around Slough to the west of London.

The company has previously said it has some 500MW of data center capacity in operation or development around Slough. Known data center customers include Amazon, CyrusOne, Equinix, Iron Mountain, Virtus, GTR, and Pure.

Segro has said the data center opportunity within its portfolio equates to more than 2.5GW of further potential additional capacity across the UK and continental Europe, with 1.1GW available to pre-let by the end of 2028. The company is known to be targeting developments in France, and previously outlined potential to develop in Italy, Germany, and Poland in key cities such as Frankfurt, Milan, Warsaw, Paris, and Marseille.

All of its lettings to date have been powered shells to colocation providers, but the company is now also providing fully fitted-out data centers and targeting hyperscalers directly.

Earlier this month, an activist investor accused Segro of “undervaluing” its high-growth data center division, suggesting the company spin off its data center arm and float a 20-30 percent stake in the Netherlands.