GMG Goodman Group

ProLogis European Properties (PEPR.AE) Tuesday dismissed a takeover bid from U.S. industrial real-estate giant ProLogis (PLD) that values the Euronext-listed warehouses developer at EUR1.2 billion ($1.73 billion), saying the offer is inadequate.

"Based on our strategy, business plans and the quality of our portfolio, we believe that the offer does not reflect the full value potential of PEPR," Chief Executive Peter Cassells said in a statement.

The biggest owner of warehouses in Europe said it had considered an opinion from Deutsche Bank AG (DB) which judged the offer as inadequate from a financial perspective.

However, it added the bid could still represent a 'liquidity event' for investors who believe their shareholding doesn't meet their investment objectives and who fear the stock's liquidity could be hampered by an increased shareholding from ProLogis.

ProLogis launched a mandatory takeover offer worth EUR6.10 per unit April 22 after it raised its stake in PEPR to about 38%. The Denver-based company said Tuesday it had since received for tender, or purchased in the open market, 8,818 ordinary units that would bring its stake to 39%.

ProLogis' offer represents a 22% premium over the closing share price April 12 when Australian property investor Goodman Group (GMG.AU) and Dutch pension-fund asset manager APG Algemene Pensioen Groep NV had a joint takeover bid for ProLogis European rejected. Goodman and APG were prepared to offer ProLogis EUR6 per unit for its stake, which valued ProLogis European at about EUR1.1 billion.

ProLogis European had a portfolio with a market value of EUR2.8 billion at the turn of the year. It consisted of 232 buildings across 11 countries, covered 4.9 million square meters, and had an occupancy level of 94.5%. At 0730 GMT, its shares traded down 0.3% at EUR6.13.

Investors and analysts have complained about a weak corporate-governance structure at ProLogis European that puts small unitholders at a significant disadvantage. Investors with less than a 20% holding have no powers to call general meetings or make proposals to the board. ProLogis can't be replaced as manager before 2016 and the company has reaffirmed that it plans to retain both its ownership in and management deal with ProLogis European.

The deal activity around the company comes as ProLogis and U.S. rival AMB Property Corp. (AMB) enter the final stages of their effort to close a $14 billion merger that would form a global real-estate powerhouse with gross assets of $46 billion. The deal is expected to be finalized June 3. ProLogis shares closed Monday at $16.29, valuing the company at just over $9.2 billion.

-By Michael Haddon, Dow Jones Newswires; 4420-7842-9289; michael.haddon@dowjones.com

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