defm14a
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
Proxy Statement Pursuant to
Section 14(a) of the Securities
Exchange Act of 1934 (Amendment
No. )
Filed by the
Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
o Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to
§240.14a-12
ProLogis
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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þ
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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MERGER
PROPOSED YOUR VOTE IS VERY IMPORTANT
The board of directors of AMB Property Corporation and the board
of trustees of ProLogis have each approved an agreement to
combine the two companies through a merger of equals. The
proposed transaction will create a truly global owner, operator
and developer of industrial real estate. The combined company,
which will be named ProLogis, Inc. and will be
organized as an umbrella partnership real estate investment
trust, or UPREIT, is expected to have a pro forma
equity market capitalization of approximately $14 billion,
a total market capitalization in excess of $24 billion, and
gross assets owned and managed of approximately
$46 billion. We believe that the combined company will
create a stronger, more liquid enterprise poised to take
advantage of changing market conditions to become the leading
global provider of industrial real estate.
In the proposed transactions, ProLogis shareholders will receive
0.4464 of a newly issued share of AMB common stock for each
ProLogis common share that they own. This exchange ratio is
fixed and will not be adjusted to reflect stock price changes
prior to the closing. AMB common stock and ProLogis common
shares are each traded on the New York Stock Exchange, under the
ticker symbols AMB and PLD,
respectively. Based on the closing price of AMB common stock on
the New York Stock Exchange (which we refer to as the
NYSE) of $32.86 on January 26, 2011, the last
trading day before ProLogis common share and AMB common stock
prices may have been affected by market speculation regarding a
potential transaction involving the companies, the exchange
ratio represented approximately $14.67 in AMB common stock for
each ProLogis common share. Based on the closing price of AMB
common stock on the NYSE of $32.93 on January 28, 2011, the
last trading day before public announcement of the proposed
transactions, the exchange ratio represented approximately
$14.70 in AMB common stock for each ProLogis common share. Based
on the closing price of AMB common stock on the NYSE of $36.52
on April 26, 2011, the latest practicable date before the
date of this joint proxy statement/prospectus, the exchange
ratio represented approximately $16.30 in AMB common stock for
each ProLogis common share. The value of the merger
consideration will fluctuate with changes in the market price of
AMB common stock. We urge you to obtain current market
quotations of AMB common stock and ProLogis common shares.
The merger of AMB and ProLogis will be accomplished through a
first-step merger of ProLogis and an indirect wholly owned
subsidiary of ProLogis and a second-step merger of a parent
entity of that subsidiary with AMB. ProLogis will continue its
existence as a subsidiary of the combined company. If the merger
of AMB and ProLogis is completed, each share of each series of
ProLogis preferred shares will be converted into a share of AMB
preferred stock of corresponding series having rights,
privileges, powers and preferences substantially identical to
those of the relevant series of ProLogis preferred shares.
Holders of ProLogis preferred shares and AMB preferred stock are
not entitled to, and are not being requested to, vote at the
special meetings.
Based upon the number of outstanding shares on the record date
for each special meeting, we anticipate that AMB will issue
254,693,674 shares of common stock and
12,000,000 shares of preferred stock in connection with the
mergers described herein, and will reserve approximately
22,227,386 shares of common stock for issuance in respect
of ProLogis equity awards, convertible notes and other
arrangements that AMB will assume in connection with the merger.
Upon completion of the transactions, we estimate that former AMB
stockholders will own approximately 40% of the common stock of
the combined company and former ProLogis shareholders will own
approximately 60% of the common stock of the combined company.
Each of the mergers is intended to qualify as a reorganization
for U.S. federal income tax purposes, and, accordingly,
assuming the transaction so qualifies, ProLogis shareholders
generally will not recognize any gain or loss for
U.S. federal income tax purposes on the surrender of their
ProLogis common shares and receipt of AMB common stock, except
with respect to cash received in lieu of any fractional shares
of AMB common stock.
Your vote is very important, regardless of the number of
shares you own. The combination of AMB and
ProLogis cannot be completed without the approval of both the
AMB stockholders and the ProLogis shareholders, including the
approval by AMB stockholders of certain amendments to the AMB
bylaws. Each of AMB and ProLogis is holding a special meeting to
vote on the proposals necessary to complete the merger
transactions. We urge you to read this joint proxy
statement/prospectus carefully. The obligations of AMB and
ProLogis to complete the merger are subject to the satisfaction
or waiver of several conditions set forth in the merger
agreement. More information about AMB, ProLogis, the special
meetings and the merger is included in this joint proxy
statement/prospectus. You should also consider carefully the
risks that are described in the Risk Factors section
beginning on page 23.
Whether or not you plan to attend your companys special
meeting, please submit your proxy as soon as possible to make
sure that your shares of AMB common stock or ProLogis common
shares are represented at that meeting.
The AMB board of directors recommends that AMB stockholders
vote FOR the proposal to approve the merger with
ProLogis, including the issuance of AMB common stock and
preferred stock to ProLogis shareholders, the proposed
amendments to the AMB bylaws, which approvals are necessary to
complete the merger, and the proposed amendments to the AMB
charter.
The ProLogis board of trustees recommends that ProLogis
shareholders vote FOR the proposal to approve the
merger agreement and the transactions contemplated thereby,
which approval is necessary to complete the merger.
We join our respective boards in their recommendation, and look
forward to the successful combination of AMB and ProLogis.
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Sincerely,
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Sincerely,
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Hamid R. Moghadam
Chief Executive Officer and Chairman
AMB Property Corporation
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Walter C. Rakowich
Chief Executive Officer
ProLogis
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the
securities to be issued under this joint proxy
statement/prospectus or determined that this joint proxy
statement/prospectus is accurate or complete. Any representation
to the contrary is a criminal offense.
This joint proxy statement/prospectus is dated April 28,
2011 and is first being mailed to the stockholders of AMB and
shareholders of ProLogis on or about May 2, 2011.
AMB
Property Corporation
Pier 1, Bay 1
San Francisco, CA 94111
(415) 394-9000
NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On June 1, 2011
Dear Stockholders of AMB Property Corporation:
We are pleased to invite you to attend a special meeting of
stockholders of AMB Property Corporation, a Maryland
corporation. The meeting will be held at AMB Property
Corporations global headquarters, which are located at
Pier 1, Bay 1, San Francisco, California 94111,
on June 1, 2011, at 9:00 a.m., local time, to consider and
vote upon the following matters:
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a proposal to approve the merger of New Pumpkin Inc., a Maryland
corporation and currently a wholly owned subsidiary of ProLogis,
with and into AMB, with AMB continuing as the surviving
corporation (which will occur following the merger of an
indirect wholly owned subsidiary of New Pumpkin with and into
ProLogis), including the issuance of AMB common stock and
preferred stock to ProLogis shareholders in connection therewith;
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a proposal to amend certain provisions of the amended and
restated bylaws of AMB, which will be the bylaws of the combined
company, effective upon the consummation of the merger described
above, to provide for certain features of the leadership
structure of the combined company;
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a proposal to amend the AMB charter (which, including the AMB
articles of incorporation, we refer to as the AMB
charter), which will be the charter of the combined
company, effective upon the consummation of the merger, to
provide that (1) the board of directors of the combined
company, with the approval of a majority of the entire board,
and without action by the stockholders of the combined company,
may amend the charter of the combined company to increase or
decrease the aggregate number of shares of stock of the combined
company or the number of shares of stock of any class or series
that the combined company has authority to issue and (2)
notwithstanding any provision of law permitting or requiring any
action to be taken or approved by the affirmative vote of the
holders of shares entitled to cast a greater number of votes,
any such action shall be effective and valid if declared
advisable by the board of directors and taken or approved by the
affirmative vote of holders of shares entitled to cast a
majority of all the votes entitled to be cast on the matter,
provided that (i) any amendment to any provision of the
charter which expressly requires for any purpose a greater
proportion of the votes entitled to be cast shall require the
proportion of votes specified in that provision, (ii) any
amendment to this provision shall require the affirmative vote
of the holders of shares entitled to cast two-thirds of all of
the votes entitled to be cast on the matter and (iii) any
action requiring a different vote as expressly provided in the
charter shall require such different vote; and
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a proposal to approve the adjournment of the AMB special
meeting, if necessary or appropriate, to solicit additional
proxies in favor of the above proposals if there are
insufficient votes at the time of such adjournment to approve
such proposals.
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The approval by AMB stockholders of both the proposal to approve
the merger and the proposal to amend certain provisions of the
bylaws is required for the completion of the merger. However,
approval of the proposal to amend the AMB charter is not a
condition to completion of the merger.
Please refer to the attached joint proxy statement/prospectus
for further information with respect to the business to be
transacted at the AMB special meeting.
Holders of record of shares of AMB common stock at the close of
business on April 21, 2011 are entitled to notice of, and
to vote at, the special meeting and any adjournments or
postponements of the special meeting.
The proposal to approve the merger, including the issuance of
AMB common and preferred stock to ProLogis shareholders in
connection therewith, requires the affirmative vote of holders
of two-thirds of the outstanding AMB common stock. The proposal
to approve the bylaw amendment requires the affirmative vote of
the holders of a majority of the outstanding AMB common stock.
The proposal to approve the amendment to the AMB charter
requires the affirmative vote of holders of two-thirds of the
outstanding AMB common stock. A proposal to adjourn the AMB
special meeting would require the affirmative vote of holders of
a majority of the AMB common stock, represented in person or by
proxy, at the AMB special meeting and entitled to vote on the
proposal.
Your vote is important. Whether or not you expect to attend
the AMB special meeting in person, we urge you to vote your
shares as promptly as possible by (1) accessing the
Internet website specified on your proxy card; (2) calling
the toll-free number specified on your proxy card; or
(3) signing and returning the enclosed proxy card in the
postage-paid envelope provided, so that your shares may be
represented and voted at the AMB special meeting. If your
shares are held in the name of a bank, broker or other
fiduciary, please follow the instructions on the voting
instruction card furnished by the record holder.
By Order of the Board of Directors,
TAMRA D. BROWNE, ESQ.
Senior Vice President, General Counsel and Secretary
April 28, 2011
San Francisco, California
ProLogis
4545 Airport Way
Denver, CO 80239
(303) 567-5761
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS
To Be Held On June 1,
2011
Dear Shareholders of ProLogis:
We are pleased to invite you to attend a special meeting of
shareholders of ProLogis, a Maryland real estate investment
trust. The meeting will be held at ProLogis world
headquarters, 4545 Airport Way, Denver, Colorado 80239, on
June 1, 2011, at 9:00 a.m., local time, to consider and
vote upon the following matters:
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a proposal to approve the merger of Pumpkin LLC, a Delaware
limited liability company and indirect wholly owned subsidiary
of ProLogis, with and into ProLogis, with ProLogis continuing as
the surviving entity and an indirect wholly owned subsidiary of
New Pumpkin Inc., a Maryland corporation and current wholly
owned subsidiary of ProLogis, followed by the merger of New
Pumpkin with and into AMB Property Corporation, with AMB
continuing as the surviving corporation under the name
ProLogis, Inc., pursuant to which each outstanding
ProLogis common share of beneficial interest will be converted
into the right to receive 0.4464 of a newly issued share of AMB
common stock (we refer to the foregoing mergers together as the
Merger); and
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a proposal to approve the adjournment of the ProLogis special
meeting, if necessary or appropriate, to solicit additional
proxies in favor of the proposal to approve the Merger if there
are insufficient votes at the time of such adjournment to
approve such proposal.
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Please refer to the attached joint proxy statement/prospectus
for further information with respect to the business to be
transacted at the ProLogis special meeting.
Holders of record of ProLogis common shares at the close of
business on April 21, 2011 are entitled to notice of, and
to vote at, the special meeting and any adjournments or
postponements of the special meeting.
The proposal to approve the Merger requires the affirmative vote
of holders of a majority of the outstanding ProLogis common
shares. A proposal to adjourn the ProLogis special meeting would
require the affirmative vote of a majority of the votes cast on
the matter by the holders of the ProLogis common shares
represented, in person or by proxy, at the ProLogis special
meeting.
Your vote is important. Whether or not you expect to attend
the ProLogis special meeting in person, we urge you to vote your
shares as promptly as possible by (1) accessing the
Internet website specified on your proxy card; (2) calling
the toll-free number specified on your proxy card; or
(3) signing and returning the enclosed proxy card in the
postage-paid envelope provided, so that your shares may be
represented and voted at the ProLogis special meeting. If
your shares are held in the name of a bank, broker or other
fiduciary, please follow the instructions on the voting
instruction card furnished by the record holder.
For the Board of Trustees,
Edward S. Nekritz
Secretary
April 28, 2011
Denver, Colorado
ADDITIONAL
INFORMATION
This joint proxy statement/prospectus incorporates by reference
important business and financial information about AMB and
ProLogis from other documents that are not included in or
delivered with this joint proxy statement/prospectus. This
information is available to you without charge upon your
request. You can obtain the documents incorporated by reference
into this joint proxy statement/prospectus by requesting them in
writing or by telephone from the appropriate company at the
following addresses and telephone numbers:
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AMB Property Corporation
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ProLogis
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Pier 1, Bay 1
San Francisco, California 94111
(415) 394-9000
Attn: Investor Relations
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4545 Airport Way
Denver, Colorado 80239
(800) 820-0181
Attn: Investor Relations
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or
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MacKenzie Partners, Inc.
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Georgeson Inc.
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105 Madison Avenue
New York, New York 10016
Call Collect:
(212) 929-5500
Call Toll Free
(800) 322-2885
Email: proxy@mackenziepartners.com
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199 Water Street 26th Floor
New York, New York 10038
Banks and Brokers Call: (212) 440-9800
Call Toll Free: (888) 867-6963
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Investors may also consult the websites of AMB or ProLogis for
more information concerning the Merger described in this joint
proxy statement/prospectus. The website of AMB is www.AMB.com
and the website of ProLogis is www.ProLogis.com.
Information included on these websites is not incorporated by
reference into this joint proxy statement/prospectus.
If you would like to request any documents, please do so by
May 25, 2011 in order to receive them before the
meetings.
For more information, see Where You Can Find More
Information.
ABOUT
THIS DOCUMENT
This joint proxy statement/prospectus, which forms part of a
registration statement on
Form S-4
filed with the Securities and Exchange Commission by AMB
Property Corporation (File
No. 333-172741),
constitutes a prospectus of AMB under Section 5 of the
U.S. Securities Act of 1933, as amended (which we refer to
as the Securities Act), with respect to the AMB
common stock and AMB preferred stock to be issued to ProLogis
shareholders in connection with the Merger. This document also
constitutes a joint proxy statement of AMB and ProLogis under
Section 14(a) of the U.S. Securities Exchange Act of
1934, as amended (which we refer to as the Exchange
Act). It also constitutes a notice of meeting with respect
to the special meeting of AMB stockholders and a notice of
meeting with respect to the special meeting of ProLogis
shareholders, at which AMB stockholders and ProLogis
shareholders, respectively, will be asked to vote upon certain
proposals to approve the Merger and certain related matters.
You should rely only on the information contained or
incorporated by reference into this joint proxy
statement/prospectus. No one has been authorized to provide you
with information that is different from that contained in, or
incorporated by reference into, this joint proxy
statement/prospectus. This joint proxy statement/prospectus is
dated April 27, 2011. You should not assume that the
information contained in, or incorporated by reference into,
this joint proxy statement/prospectus is accurate as of any date
other than the date on the front cover of those documents.
Neither our mailing of this joint proxy statement/prospectus to
AMB stockholders or ProLogis shareholders nor the issuance of
AMB common stock or preferred stock in connection with the
Merger will create any implication to the contrary.
This joint proxy statement/prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any
securities, or the solicitation of a proxy, in any jurisdiction
in which or from any person to whom it is unlawful to make any
such offer or solicitation in such jurisdiction. Information
contained in this joint proxy statement/prospectus regarding AMB
has been provided by AMB and information contained in this joint
proxy statement/prospectus regarding ProLogis has been provided
by ProLogis.
TABLE OF
CONTENTS
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iii
QUESTIONS
AND ANSWERS
The following are answers to some questions that you, as a
stockholder of AMB Property Corporation (which we refer to as
AMB) or a shareholder of ProLogis, may have
regarding the proposed transactions between AMB and ProLogis and
the other matters being considered at the stockholder meeting of
AMB and at the shareholder meeting of ProLogis. AMB and ProLogis
urge you to read carefully the remainder of this joint proxy
statement/prospectus because the information in this section
does not provide all the information that might be important to
you with respect to the Merger and the other matters being
considered at the special meetings. Additional important
information is also contained in the annexes to and the
documents incorporated by reference into this joint proxy
statement/prospectus.
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What is the Merger? |
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AMB and ProLogis have agreed to a merger of equals between AMB
and ProLogis under the terms of an Agreement and Plan of Merger,
dated as of January 30, 2011 and amended as of
March 9, 2011 (which we refer to as the merger
agreement), by and among AMB, AMB Property, L.P. (which we
refer to as AMB LP), ProLogis, Upper Pumpkin LLC
(which we refer to as Upper Pumpkin), New Pumpkin
Inc. (which we refer to as New Pumpkin) and Pumpkin
LLC. Each of Pumpkin LLC, Upper Pumpkin, and New Pumpkin is a
direct or indirect wholly owned subsidiary of ProLogis. A copy
of the merger agreement is attached as Annex A to this
joint proxy statement/prospectus. |
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Pursuant to the merger agreement, AMB and ProLogis will combine
through a multi-step process: |
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first, ProLogis will be reorganized into an umbrella
partnership real estate investment trust (which we refer to as
an UPREIT) by merging Pumpkin LLC with and into
ProLogis, with ProLogis continuing as the surviving entity and
as a wholly owned subsidiary of Upper Pumpkin and an indirect
wholly owned subsidiary of New Pumpkin (we refer to this as the
ProLogis merger);
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following the ProLogis merger, New Pumpkin will be
merged with and into AMB, with AMB continuing as the surviving
corporation under the name of ProLogis, Inc. (we
refer to this as the Topco merger, and we refer to
the ProLogis merger and the Topco merger together as the
Merger); and
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following the Topco merger, the combined company
will contribute all of the outstanding equity interests of Upper
Pumpkin to AMB LP (which we refer to as the
contribution), in exchange for the issuance of
equity interests in AMB LP (which we refer to as the
issuance), and AMB LP will be renamed
ProLogis, L.P..
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ProLogis will continue its existence as a subsidiary of the
combined company. The shares of common stock of the combined
company will be listed and traded on the NYSE under the symbol
PLD. |
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Why is the combined company being structured as an UPREIT? |
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The parties believe that the UPREIT structure, by which the
combined company will own substantially all of its assets and
conduct substantially all of its operations through an operating
partnership, will give the combined company greater flexibility
to acquire assets using a tax-deferred acquisition currency. |
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Q: |
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Why am I receiving this joint proxy statement/prospectus? |
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A: |
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The Merger cannot be completed unless: |
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the holders of AMB common stock vote to approve the
Topco merger (including the issuance of AMB common stock and
preferred stock to ProLogis shareholders in connection with the
Topco merger);
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the holders of AMB common stock vote to approve a
proposal to amend certain provisions of the amended and restated
bylaws of AMB (we refer to the amended and restated bylaws of
AMB as the AMB bylaws and to the amendment as the
bylaw amendment), which will be the bylaws of the
combined company effective upon the consummation of the Topco
merger, to provide for certain features of the leadership
structure of the combined company; and
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the holders of ProLogis common shares of beneficial
interest (which we refer to as ProLogis common
shares) vote to approve the Merger.
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iv
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Each of AMB and ProLogis will hold separate special meetings to
obtain these approvals. At the AMB special meeting, AMB
stockholders also will be asked to vote to approve certain
amendments to the AMB charter (we refer to the AMB charter,
including the AMB articles of incorporation, as the AMB
charter and to the amendments as the charter
amendment). However, approval of the proposal to amend the
AMB charter is not a condition to completion of the Topco merger. |
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This joint proxy statement/prospectus contains important
information about the Merger and the other proposals being voted
on at the special meetings, and you should read it carefully. It
is a joint proxy statement because the AMB board of directors is
soliciting proxies from its stockholders and the ProLogis board
of trustees is soliciting proxies from its shareholders. It is a
prospectus because AMB will issue shares of its common stock and
preferred stock in the Topco merger. The enclosed voting
materials allow you to vote your shares without attending your
respective meeting. |
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Your vote is important. We encourage you to vote as soon as
possible. |
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Q: |
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When and where will the special meetings be held? |
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A: |
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The AMB special meeting will be held at AMB Property
Corporations global headquarters, which are located at
Pier 1, Bay 1, San Francisco, California 94111, on
June 1, 2011, at 9:00 a.m., local time. The ProLogis
special meeting will be held at ProLogis world
headquarters, 4545 Airport Way, Denver, Colorado 80239, on
June 1, 2011, at 9:00 a.m., local time. |
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Q: |
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How do I vote? |
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A: |
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If you are a holder of record of AMB common stock as of the
record date for the AMB special meeting or a holder of record of
ProLogis common shares as of the record date for the ProLogis
special meeting, you may vote in person by attending your
special meeting or, to ensure your shares are represented at the
meeting, you may vote by: |
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accessing the Internet website specified on your
proxy card;
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calling the toll-free number specified on your proxy
card; or
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signing and returning the enclosed proxy card in the
postage-paid envelope provided.
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If you hold AMB common stock or ProLogis common shares in the
name of a broker, bank or nominee, please follow the voting
instructions provided by your broker, bank or nominee to ensure
that your stock or shares are represented at your special
meeting. |
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Q: |
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What am I being asked to vote upon? |
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AMB. AMB stockholders are being asked to vote
to approve the Topco merger (including the issuance of AMB
common stock and preferred stock to ProLogis shareholders in
connection with the Topco merger), to approve the bylaw
amendment and to approve the charter amendment. |
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ProLogis. ProLogis shareholders are being
asked to vote to approve the Merger. |
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The Merger cannot be completed without the approval by AMB
stockholders of the proposals relating to the Topco merger and
the bylaw amendment and cannot be completed without the approval
by ProLogis shareholders of the proposal relating to the Merger.
However, approval of the proposal to amend the AMB charter is
not a condition to completion of the Merger. |
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Q: |
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How do the AMB board of directors and the ProLogis board of
trustees recommend that I vote? |
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AMB. The AMB board of directors unanimously
recommends that holders of AMB common stock vote
FOR the Topco merger (including the issuance
of AMB common stock and preferred stock to ProLogis shareholders
in connection with the Topco merger), FOR the
bylaw amendment, FOR the charter amendment
and FOR the AMB adjournment proposal. |
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ProLogis. The ProLogis board of trustees
unanimously recommends that holders of ProLogis common shares
vote FOR the Merger and FOR
the ProLogis adjournment proposal. |
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Q: |
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What vote is required to approve each proposal? |
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AMB. The proposals at the AMB special meeting
to approve the Topco merger (including the issuance of AMB
common stock and preferred stock to ProLogis shareholders in
connection with the Topco merger), and to approve the charter
amendment each require approval by the affirmative vote of
holders of two-thirds of the outstanding AMB common stock. The
proposal to approve the bylaw amendment requires approval by the
affirmative vote of holders of a majority of the outstanding AMB
common stock. The proposal to adjourn the AMB special meeting,
if necessary or appropriate, to solicit additional proxies
requires approval by the affirmative vote of holders of a
majority of the shares of AMB common stock represented, in
person or by proxy, at the AMB special meeting and entitled to
vote on the proposal. |
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ProLogis. The proposal at the ProLogis special
meeting to approve the Merger requires the affirmative vote of
the holders of a majority of the outstanding ProLogis common
shares. The proposal to adjourn the ProLogis special meeting, if
necessary or appropriate, to solicit additional proxies requires
the affirmative vote of a majority of the votes cast on the
matter by the holders of the ProLogis common shares represented,
in person or by proxy, at the ProLogis special meeting. |
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How many votes do I have? |
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A: |
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AMB. You are entitled to one vote for each
share of AMB common stock that you owned as of the close of
business on the record date. As of the close of business on
April 21, 2011, the record date for the AMB special
meeting, there were 169,550,440 outstanding shares of AMB common
stock, approximately 2.5% of which were beneficially owned by
the directors and executive officers of AMB. |
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ProLogis. You are entitled to one vote for
each ProLogis common share that you owned as of the close of
business on the record date. As of the close of business on
April 21, 2011, the record date for the ProLogis special
meeting, there were approximately 570,550,345 outstanding
ProLogis common shares, less than 1% of which were beneficially
owned by the trustees and executive officers of ProLogis. |
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Q: |
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What constitutes a quorum? |
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AMB. Stockholders who hold a majority of the
AMB common stock outstanding on the record date and who are
entitled to vote must be present or represented by proxy to
constitute a quorum at the AMB special meeting. |
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ProLogis. Shareholders who hold a majority of
the ProLogis common shares outstanding on the record date and
who are entitled to vote must be present or represented by proxy
to constitute a quorum at the ProLogis special meeting. |
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Q: |
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If my shares are held in street name by my
broker, will my broker vote my shares for me? |
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A: |
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If you hold your shares in a stock brokerage account or if your
shares are held by a bank or nominee (that is, in street
name), you must provide the record holder of your shares
with instructions on how to vote your shares. Please follow the
voting instructions provided by your broker, bank or nominee.
Please note that you may not vote shares held in street name by
returning a proxy card directly to AMB or ProLogis or by voting
in person at your special meeting unless you provide a
legal proxy, which you must obtain from your broker,
bank or nominee. Further, brokers who hold shares of AMB common
stock or ProLogis common shares on behalf of their customers may
not give a proxy to AMB or ProLogis to vote those shares without
specific instructions from their customers. |
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Q: |
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What will happen if I fail to vote or I abstain from
voting? |
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A: |
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AMB. If you are an AMB stockholder and fail to
vote, fail to instruct your broker, bank or nominee to vote or
abstain from voting, it will have the same effect as a vote
against the Topco merger (including the issuance of AMB common
stock and preferred stock to ProLogis shareholders in connection
with the Topco merger), a vote against the bylaw amendment and a
vote against the charter amendment. If you fail to vote or fail
to instruct your broker, bank or nominee to vote, and as a
result your shares are not represented at the meeting, it will
have no effect on the adjournment proposal. If your shares are
represented at the meeting but you abstain from voting or your
shares are otherwise not voted in favor of the adjournment
proposal, it will have the effect of a vote against that
proposal. |
vi
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ProLogis. If you are a ProLogis shareholder
and fail to vote, fail to instruct your broker, bank or nominee
to vote or abstain from voting, it will have the same effect as
a vote against the proposal to approve the Merger, but it will
have no effect on the ProLogis adjournment proposal. |
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Q: |
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What will happen if I fail to instruct my broker, bank or
nominee how to vote? |
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A: |
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AMB. If you are an AMB stockholder and you do
not instruct your broker, bank or nominee on how to vote your
shares, your broker may not vote your shares on the proposal to
approve the Topco merger, the proposal to approve the bylaw
amendment or the proposal to approve the charter amendment. This
will have the same effect as a vote against each of such
proposals. |
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ProLogis. If you are a ProLogis shareholder
and you fail to instruct your broker, bank or nominee to vote,
it will have the same effect as a vote against the proposal to
approve the Merger. |
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Q: |
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What if I return my proxy card without indicating how to
vote? |
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A: |
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If you sign and return your proxy card without indicating how to
vote on any particular proposal, your shares will be voted in
accordance with the recommendation of the AMB board of directors
or ProLogis board of trustees, as applicable, with respect to
such proposal. |
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Q: |
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Can I change my vote after I have returned a proxy or voting
instruction card? |
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A: |
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Yes. You can change your vote at any time before your proxy is
voted at your special meeting. You can do this in one of three
ways: |
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you can send a signed notice of revocation;
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you can grant a new, valid proxy bearing a later
date; or
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if you are a holder of record, you can attend your
special meeting and vote in person, which will automatically
cancel any proxy previously given, or you may revoke your proxy
in person, but your attendance alone will not revoke any proxy
that you have previously given.
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If you choose either of the first two methods, you must submit
your notice of revocation or your new proxy to the secretary of
AMB or secretary of ProLogis, as appropriate, no later than the
beginning of the applicable special meeting. If your shares are
held in street name by your broker, bank or nominee, you should
contact your broker, bank or nominee to change your vote. |
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Q: |
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What are the material U.S. federal income tax consequences of
the Merger to U.S. holders of ProLogis common shares? |
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A: |
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Each of the ProLogis merger and the Topco merger is intended to
qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended. Assuming each of the ProLogis merger and the Topco
merger qualifies as a reorganization, a U.S. holder of ProLogis
common shares generally will not recognize any gain or loss upon
surrender of ProLogis common shares and receipt of shares of AMB
common stock, except with respect to cash received in lieu of a
fractional share of AMB common stock. |
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Q: |
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When do you expect the Merger to be completed? |
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A: |
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AMB and ProLogis are working to complete the Merger in the
second quarter of 2011. However, the Merger is subject to
various regulatory approvals and other conditions, and it is
possible that factors outside the control of both companies
could result in the Merger being completed at a later time, or
not at all. There may be a substantial amount of time between
the respective AMB and ProLogis special meetings and the
completion of the Merger. AMB and ProLogis expect to complete
the Merger as soon as reasonably practicable following the
receipt of all required approvals. |
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Q: |
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What do I need to do now? |
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A: |
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Carefully read and consider the information contained in and
incorporated by reference into this joint proxy
statement/prospectus, including its annexes. |
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In order for your shares to be represented at your special
meeting: |
vii
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you can attend your special meeting in person;
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you can vote through the Internet or by telephone by
following the instructions included on your proxy card; or
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you can indicate on the enclosed proxy or voting
instruction card how you would like to vote and return the card
in the accompanying postage-paid envelope.
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Q: |
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Do I need to do anything with my share certificates now? |
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A: |
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No. You should not submit your share certificates at
this time. After the Merger is completed, if you held
certificates representing ProLogis common shares or preferred
shares prior to the Merger, the exchange agent for the combined
company will send you a letter of transmittal and instructions
for exchanging your shares for the merger consideration. Upon
surrender of the certificates for cancellation along with the
executed letter of transmittal and other required documents
described in the instructions, a ProLogis shareholder will
receive the merger consideration. |
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If you are an AMB stockholder, you are not required to take any
action with respect to your AMB stock certificates. Such
certificates will continue to represent shares of the combined
company after the Topco merger. However, after the Topco merger
is completed, the exchange agent for the combined company will
send you a letter of transmittal and instructions for exchanging
your AMB stock certificates for stock certificates of the
combined company. Upon surrender of the certificates for
cancellation along with the executed letter of transmittal and
other required documents described in the instructions, an AMB
stockholder will receive a stock certificate of the combined
company. |
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Q: |
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Do I need identification to attend the AMB special meeting or
ProLogis special meeting in person? |
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A: |
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Yes. Please bring proper identification, together with proof
that you are a record owner of AMB common stock or ProLogis
common shares. If your shares are held in street name or through
an AMB or ProLogis retirement plan, please bring acceptable
proof of ownership, such as a letter from your broker or an
account statement stating or showing that you beneficially owned
shares of AMB common stock or ProLogis common shares, as
applicable, on the applicable record date. |
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Q: |
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Who can help answer my questions? |
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A: |
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AMB stockholders or ProLogis shareholders who have questions
about the Merger or the other matters to be voted on at the
special meetings or who desire additional copies of this joint
proxy statement/prospectus or additional proxy or voting
instruction cards should contact: |
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if you are an AMB stockholder:
MacKenzie Partners, Inc. 105 Madison Avenue New York, New York 10016 (212) 929-5500 (Call Collect) or Call Toll-Free (800) 322-2885
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if you are a ProLogis shareholder:
Georgeson Inc. 199 Water Street - 26th Floor New York, New York 10038 Banks and Brokers Call: (212) 440-9800 or Call Toll Free: (888) 867-6963
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Email: proxy@mackenziepartners.com
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viii
SUMMARY
This summary highlights information contained elsewhere in
this joint proxy statement/prospectus and may not contain all
the information that is important to you. AMB and ProLogis urge
you to read carefully the remainder of this joint proxy
statement/prospectus, including the attached annexes, and the
other documents to which we have referred you because this
section does not provide all the information that might be
important to you with respect to the Merger and the related
matters being considered at the applicable special meeting. See
also Where You Can Find More Information. We have
included page references to direct you to a more complete
description of the topics presented in this summary.
Information
about the Companies
AMB
Property Corporation
(See
page 31)
AMB, a Maryland corporation, is a self-administered and
self-managed real estate investment trust (which we refer to as
a REIT) for U.S. federal income tax purposes.
AMB, together with its subsidiaries, is a global owner, operator
and developer of industrial real estate, focused on major hub
and gateway distribution markets in the Americas, Europe and
Asia. As of December 31, 2010, the company owned, or had
investments in, on a consolidated basis or through
unconsolidated joint ventures, properties and development
projects expected to total approximately 159.6 million
square feet (14.8 million square meters) in 49 markets
within 15 countries.
The business of AMB is operated primarily through its operating
partnership, AMB Property, L.P. (which we refer to as AMB
LP). As of December 31, 2010, AMB owned an
approximate 98.2% general partnership interest in AMB LP,
excluding preferred units, and, as its sole general partner, AMB
has the full, exclusive and complete responsibility for and
discretion in the
day-to-day
management and control of AMB LP. AMB LP holds substantially all
the assets of AMB and directly or indirectly holds the ownership
interests in AMBs joint ventures.
The principal offices of AMB are located at Pier 1, Bay 1,
San Francisco, California 94111 and its telephone number is
(415) 394-9000.
AMB common stock is listed on the New York Stock Exchange (which
we refer to as the NYSE), trading under the symbol
AMB.
Additional information about AMB and its subsidiaries is
included in documents incorporated by reference into this joint
proxy statement/prospectus and Where You Can Find More
Information.
ProLogis
(See
page 31)
ProLogis, a Maryland real estate investment trust, is the
leading global provider of distribution facilities, with more
than 435 million square feet (40 million square
meters) of industrial space in markets across North America,
Europe and Asia. The company leases its industrial facilities to
more than 4,400 customers, including manufacturers, retailers,
transportation companies, third-party logistics providers and
other enterprises with large-scale distribution needs. ProLogis
owns and manages a global portfolio of properties in 19
countries, comprising over $31 billion in assets. New
Pumpkin, a Maryland corporation, Upper Pumpkin, a Delaware
limited liability company, and Pumpkin LLC, a Delaware limited
liability company, are direct or indirect wholly owned
subsidiaries of ProLogis and were formed for the purpose of
effecting the Merger.
The principal offices of ProLogis are located at 4545 Airport
Way, Denver, Colorado 80239 and its telephone number is
(303) 567-5000.
ProLogis common shares of beneficial interest (which we refer to
as ProLogis common shares) are listed on the NYSE,
trading under the symbol PLD.
Additional information about ProLogis and its subsidiaries is
included in documents incorporated by reference into this joint
proxy statement/prospectus and Where You Can Find More
Information.
The
Combined Company
(See
page 32)
The combined company will be named ProLogis, Inc.
and will be a Maryland corporation that is a self-administered
and self-managed REIT for U.S. federal income tax purposes.
The combined company is expected to be a leading global owner,
operator and developer of industrial real estate. The combined
company is expected to have a pro forma equity market
capitalization of approximately $14 billion, a total market
capitalization in excess of
1
$24 billion, and gross assets owned and managed of
approximately $46 billion. The combined company will own or
manage approximately 600 million square feet (approximately
55 million square meters) of modern distribution facilities
located in key gateway markets and logistics corridors in 22
countries.
References to the combined company in this document
shall be to AMB Property Corporation after the effective time of
the Merger, which will be renamed as ProLogis, Inc.
The business of the combined company will be operated through an
operating partnership, ProLogis, L.P. On a pro forma basis
giving effect to the Merger, the combined company will own an
approximate 99.3% general partnership interest in the operating
partnership, excluding preferred units, and, as its sole general
partner, the combined company will have the full, exclusive and
complete responsibility for and discretion in the
day-to-day
management and control of the operating partnership.
The corporate headquarters of the combined company will be
located at Pier 1, Bay 1, San Francisco, California 94111
and its telephone number will be
(415) 394-9000.
The operational headquarters of the combined company will be
located at 4545 Airport Way, Denver, Colorado 80239 and its
telephone number will be
(303) 567-5000.
The common stock of the combined company will be listed on the
NYSE, trading under the symbol PLD.
Risk
Factors (See page 23)
Before voting at the AMB special meeting or the ProLogis special
meeting, you should carefully consider all of the information
contained in or as incorporated by reference into this joint
proxy statement/prospectus, as well as the specific factors
under the heading Risk Factors.
The
Merger
The
Merger Agreement
(See
page 77)
AMB and ProLogis have entered into the merger agreement attached
as Annex A to this joint proxy statement/prospectus. The
AMB board of directors and the ProLogis board of trustees have
both unanimously approved the combination of AMB and ProLogis in
what the parties intend to be a merger of equals.
AMB and ProLogis encourage you to read the entire merger
agreement carefully because it is the principal legal document
governing the Merger.
Form
of the Merger
(See
page 77)
Pursuant to the merger agreement, AMB and ProLogis will combine
through a multi-step process:
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first, in the ProLogis merger, ProLogis will be reorganized into
an UPREIT by merging Pumpkin LLC with and into ProLogis, with
ProLogis continuing as the surviving entity and as a wholly
owned subsidiary of Upper Pumpkin and an indirect wholly owned
subsidiary of New Pumpkin;
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following the ProLogis merger, in the Topco merger, New Pumpkin
will be merged with and into AMB, with AMB continuing as the
surviving corporation under the name of ProLogis,
Inc.; and
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following the Topco merger, the combined company will contribute
all of the outstanding equity interests of Upper Pumpkin to AMB
LP, which will be renamed ProLogis, L.P., in
exchange for the issuance of partnership units to the combined
company.
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ProLogis will continue its existence as a subsidiary of the
combined company. The shares of common stock of the combined
company will be listed and traded on the NYSE under the symbol
PLD.
We expect that the former shareholders of ProLogis and the
former stockholders of AMB will own approximately 60% and 40%,
respectively, of the outstanding common stock of the combined
company.
Merger
Consideration
(See
page 77)
Upon completion of the Merger, holders of ProLogis common shares
will receive 0.4464 of a newly issued share of AMB common stock
for each ProLogis common share they own at the effective time of
the Topco merger,
2
with cash paid in lieu of fractional shares. The exchange ratio
is fixed and will not be adjusted for changes in the market
value of ProLogis common shares or AMB common stock. Because of
this, the implied value of the consideration to ProLogis
shareholders will fluctuate between now and the completion of
the Merger. Based on the closing price of AMB common stock on
the NYSE of $32.86 on January 26, 2011, the last trading
day before ProLogis common share and AMB common stock prices may
have been affected by market speculation regarding a potential
transaction involving the companies, the exchange ratio
represented approximately $14.67 in AMB common stock for each
ProLogis common share. Based on the closing price of AMB common
stock on the NYSE of $32.93 on January 28, 2011, the last
trading day before public announcement of the Merger, the
exchange ratio represented approximately $14.70 in AMB common
stock for each ProLogis common share. Based on the closing price
of AMB common stock on the NYSE of $36.52 on April 26,
2011, the latest practicable date before the date of this joint
proxy statement/prospectus, the exchange ratio represented
approximately $16.30 in AMB common stock for each ProLogis
common share. See Comparative Stock Prices and
Dividends.
The following table presents trading information for AMB common
stock and ProLogis common shares on January 26, 2011, the
last trading day before ProLogis common share and AMB common
stock prices may have been affected by market speculation
regarding a potential transaction involving the companies,
January 28, 2011, the last trading day before public
announcement of the Merger, and April 26, 2011, the latest
practicable date before the date of this joint proxy
statement/prospectus. Equivalent per share prices for ProLogis
common shares, adjusted by the exchange ratio of 0.4464, are
also provided for each of these dates.
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Equivalent
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AMB Common Stock
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ProLogis Common
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Per Share
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(Close)
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Shares (Close)
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Price
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January 26, 2011
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$
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32.86
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$
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14.70
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$
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14.67
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January 28, 2011
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$
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32.93
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$
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15.21
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$
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14.70
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April 26, 2011
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$
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36.52
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$
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16.43
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$
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16.30
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The market prices of AMB common stock and ProLogis common shares
fluctuate. As a result, we urge you to obtain current market
quotations of AMB common stock and ProLogis common shares.
Treatment
of ProLogis Share Options and Other Equity-Based Awards
(See
page 78)
Upon completion of the Topco merger, outstanding share options
to purchase ProLogis common shares, share unit awards with
respect to ProLogis common shares, dividend equivalent units
with respect to ProLogis common shares and performance share
awards denominated in ProLogis common shares will generally be
converted into stock options, stock unit awards, dividend
equivalent units and performance stock awards with respect to
common stock of the combined company, after giving effect to the
exchange ratio. Equity awards of AMB will remain outstanding
upon completion of the Merger as equity awards of the combined
company.
The ProLogis Employee Share Purchase Plan will be automatically
suspended effective as of the earlier of June 30, 2011 or
ProLogis payroll period ending immediately prior to the
closing of the Topco merger, but in no event less than ten
business days prior to the closing of the Topco merger, and any
contributions made for the offering period in effect as of
January 30, 2011, the date of the merger agreement, will be
applied to the purchase of ProLogis common shares, and any cash
remaining in the ProLogis Employee Share Purchase Plan after
such suspension date will be promptly refunded to plan
participants. See The Merger Treatment of
ProLogis Share Options and Other Equity-Based Awards.
Treatment
of ProLogis Preferred Shares in the Merger
(See
page 77)
Upon completion of the Merger:
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each outstanding Series C Cumulative Redeemable Preferred
Share of Beneficial Interest of ProLogis (which we refer to as
ProLogis Series C preferred shares) will be
exchanged for one newly issued share of Cumulative Redeemable
Preferred Stock, Series Q, of AMB (which we refer to as
AMB Series Q preferred stock);
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each outstanding Series F Cumulative Redeemable Preferred
Share of Beneficial Interest of ProLogis (which we refer to as
ProLogis Series F preferred shares) will be
exchanged for one newly issued share of Cumulative Redeemable
Preferred Stock, Series R, of AMB (which we refer to as
AMB Series R preferred stock); and
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each outstanding Series G Cumulative Redeemable Preferred
Share of Beneficial Interest of ProLogis (which we refer to as
ProLogis Series G preferred shares) will be
exchanged for one newly issued share of Cumulative Redeemable
Preferred Stock, Series S, of AMB (which we refer to as
AMB Series S preferred stock).
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Recommendations
of the AMB Board of Directors
(See
page 39)
After careful consideration, the AMB board of directors, on
January 30, 2011, unanimously approved the merger agreement
and declared the merger agreement and the transactions
contemplated thereby (including the Topco merger, the bylaw
amendment and the charter amendment) to be advisable and in the
best interests of AMB and the stockholders of AMB.
The AMB board of directors unanimously recommends that holders
of AMB common stock vote FOR the Topco merger
(including the issuance of AMB common stock and preferred stock
to ProLogis shareholders in connection with the Topco merger),
FOR the bylaw amendment, FOR
the charter amendment and FOR the AMB
adjournment proposal.
For the factors considered by the AMB board of directors in
reaching its decision to approve the merger agreement and the
recommendations of the AMB board of directors, see The
Merger AMBs Reasons for the Topco Merger;
Recommendations of the AMB Board of Directors.
Recommendation
of the ProLogis Board of Trustees
(See
page 42)
After careful consideration, the ProLogis board of trustees, on
January 30, 2011, unanimously approved the merger agreement
and declared the merger agreement and the transactions
contemplated thereby, including the Merger, to be advisable and
in the best interests of ProLogis and the shareholders of
ProLogis.
The ProLogis board of trustees unanimously recommends that the
ProLogis shareholders vote FOR the proposal
to approve the Merger and FOR the ProLogis
adjournment proposal.
For the factors considered by the ProLogis board of trustees in
reaching its decision to approve the merger agreement and the
recommendations of the ProLogis board of trustees, see The
Merger ProLogis Reasons for the Merger;
Recommendations of the ProLogis Board of Trustees.
Opinion
of AMBs Financial Advisor
(See
page 45)
J.P. Morgan Securities LLC (which we refer to as J.P.
Morgan) delivered its opinion to the AMB board of
directors that, as of January 30, 2011, and based upon and
subject to the assumptions, procedures, factors, qualifications
and limitations set forth therein, the exchange ratio of 0.4464
provided for in the Topco merger was fair, from a financial
point of view, to AMB. The full text of the written opinion of
J.P. Morgan, dated January 30, 2011, which sets forth
the assumptions made, procedures followed, factors considered,
and qualifications and limitations on the review undertaken by
J.P. Morgan in connection with its opinion, is attached
hereto as Annex D to this joint proxy statement/prospectus
and is incorporated herein by reference. The opinion of
J.P. Morgan was directed to the AMB board of directors for
the information and assistance of the AMB board of directors in
connection with its evaluation of the Topco merger and addressed
only the fairness as of the date of the opinion, from a
financial point of view, of the exchange ratio to AMB. The
opinion of J.P. Morgan was not intended to, and does not,
constitute a recommendation to any holder of AMB common stock as
to how such stockholder should vote or act with respect to the
Topco merger or any other matter.
4
Opinion
of ProLogis Financial Advisor
(See
page 52)
Morgan Stanley & Co. Incorporated (which we refer to
as Morgan Stanley) delivered its opinion to the
ProLogis board of trustees that, as of January 30, 2011,
and based upon and subject to the assumptions, procedures,
factors, qualifications and limitations set forth therein, the
exchange ratio of 0.4464 pursuant to the merger agreement was
fair, from a financial point of view, to the holders of ProLogis
common shares. The full text of the written opinion of Morgan
Stanley, dated January 30, 2011, which sets forth the
assumptions made, procedures followed, factors considered, and
qualifications and limitations on the review undertaken by
Morgan Stanley in connection with its opinion, is attached
hereto as Annex E to this joint proxy statement/prospectus
and is incorporated herein by reference. The opinion of Morgan
Stanley was directed to the ProLogis board of trustees,
addressed only the fairness as of the date of the opinion, from
a financial point of view, of the exchange ratio to the holders
of ProLogis common shares and does not address any other aspect
of the transaction. The opinion of Morgan Stanley was not
intended to, and does not, constitute a recommendation to any
holder of ProLogis common shares or AMB common stock as to how
such shareholder or stockholder should vote or act with respect
to the Merger or any matter.
Interests
of AMB Directors and Executive Officers in the Merger
(See
page 65)
In considering the recommendation of the AMB board of directors
that AMB stockholders vote to approve the Topco merger, AMB
stockholders should be aware that some of the executive officers
and directors of AMB have financial interests in the Merger that
are different from, or in addition to, the interests of AMB
stockholders generally. The AMB board of directors was aware of
and considered these interests, among other matters, in
evaluating and negotiating the merger agreement and the Topco
merger, in approving the merger agreement, and in recommending
that the AMB stockholders approve the Topco merger (including
the issuance of AMB common stock and preferred stock to ProLogis
shareholders in connection with the Topco merger). For purposes
of all of the AMB agreements and plans described below, the
completion of the transactions contemplated by the merger
agreement will constitute a change in control of AMB.
In connection with the Topco merger, AMB LP entered into letter
agreements with each AMB executive officer which, conditioned
upon and effective as of the consummation of the Topco merger,
amend their existing change in control agreements with AMB LP.
The general purpose of such amendments was to provide that the
vesting of the equity awards held by the AMB executive officers
would accelerate only upon a severance-qualifying termination
following a change in control (instead of immediate acceleration
following the change in control). These change in control
agreements with AMB LP, as amended by the letter agreements,
provide severance and other benefits in the case of qualifying
terminations of employment within two years following a change
in control of AMB, such as the Topco merger or another change in
control of the combined company.
The terms of the deferred compensation plans of AMB provide that
upon a change in control, such as the Topco merger, participants
will receive a lump-sum payment equal to his or her vested
account balance. Each of AMBs executive officers (with the
exception of Mr. Eugene F. Reilly) is a participant under
such plans. Conditioned upon the consummation of the Topco
merger, AMB also adopted a new supplemental non-qualified
deferred compensation plan to provide an opportunity for
participants under AMBs existing deferred compensation
plan to continue to receive tax-deferred earnings with respect
to the shares or cash withheld to pay taxes as a result of the
required, non-waivable, distributions under the existing
deferred compensation plans which will be triggered by the
consummation of the Topco merger. These grants would not make
participants whole for taxes paid on the required distributions,
but only whole to the extent that those taxes will be paid
earlier than both they and AMB anticipated when deferrals under
the existing deferred compensation plans were made.
Following the consummation of the Merger, Mr. Hamid R.
Moghadam, Ms. Lydia H. Kennard, Mr. J. Michael Losh,
Mr. Jeffrey L. Skelton and Mr. Carl B. Webb, each of
whom is currently a member of the AMB board of directors, will
be elected to the board of directors of the combined company.
Mr. Moghadam will serve as chairman and co-chief executive
officer of the combined company until no later than
December 31, 2012, following which he will become sole
chief executive officer and remain chairman of the combined
company. Mr. Olinger, the current chief financial officer
of AMB, will serve as the chief integration officer of the
combined company until no later than December 31, 2012,
following which he will become the chief financial officer of
the combined company.
5
Interests
of ProLogis Trustees and Executive Officers in the Merger
(See
page 68)
In considering the recommendation of the ProLogis board of
trustees that ProLogis shareholders vote to approve the Merger,
you should be aware that some of the trustees and executive
officers of ProLogis have interests in the Merger that are
different from, or in addition to, the interests of ProLogis
shareholders generally. The board of trustees of ProLogis was
aware of and considered these interests, among other matters, in
evaluating and negotiating the merger agreement and the Merger,
in approving the merger agreement, and in recommending that the
ProLogis shareholders approve the Merger.
In connection with the Topco merger, ProLogis has entered into
letter agreements with certain executive officers (and expects
to enter into letter agreements with other non-executive senior
officers) which, conditioned upon and effective as of the
consummation of the Topco merger, amend their existing executive
protection agreements with ProLogis. These executive protection
agreements with ProLogis, as amended by the letter agreements,
provide severance and other benefit protections in the case of
qualifying terminations of employment for a limited period of
time following the Topco merger or another change in control of
the combined company.
ProLogis also entered into an employment agreement with
Mr. Walter C. Rakowich which will become effective on
January 1, 2012, provided that the Topco merger has
occurred by that date. Among other things, the new employment
agreement provides that he will provide services as the co-chief
executive officer of the combined company until
December 31, 2012, subject to earlier termination in
accordance with its terms. Under the new employment agreement,
Mr. Rakowich waived his right to resign his employment in a
constructive discharge under his current employment agreement
with ProLogis solely due to his position as co-chief executive
officer of the combined company following the consummation of
the Topco merger.
Following the consummation of the Merger, six persons selected
by ProLogis, Mr. Walter C. Rakowich, Mr. Irving F. Lyons III,
Mr. George L. Fotiades, Ms. Christine Garvey, Mr. D. Michael
Steuert and Mr. William D. Zollars, each of whom (other than Mr.
Zollars) is currently a member of the ProLogis board of
trustees, will be elected to the board of directors of the
combined company. Mr. Rakowich will also become the
chairman of the executive committee of the board of directors of
the combined company, and Mr. Lyons will become the lead
independent director of the combined company. In addition,
Mr. Rakowich will become co-chief executive officer of the
combined company, until no later than December 31, 2012,
when his employment as a director and co-chief executive officer
will expire and he will retire from both positions. Furthermore,
Mr. William E. Sullivan, the current chief financial
officer of ProLogis, will become chief financial officer of the
combined company, and his employment as chief financial officer
of the combined company will continue until December 31,
2012, subject to earlier termination in accordance with the
terms of his employment.
See The Merger Interests of ProLogis Trustees
and Executive Officers in the Merger for additional
information about these interests.
Directors
and Management Following the Merger
(See
page 71)
Following the consummation of the Merger, the board of directors
of the combined company will have eleven members, consisting of
Mr. Moghadam, Mr. Rakowich, Mr. Fotiades,
Ms. Garvey, Ms. Kennard, Mr. Losh,
Mr. Lyons, Mr. Skelton, Mr. Steuert,
Mr. Webb and Mr. Zollars. Mr. Moghadam will become
chairman of the board of directors of the combined company and
Mr. Rakowich will become the chairman of the executive
committee of the board of directors of the combined company.
Mr. Lyons will become the lead independent director of the
combined company.
Following the Merger, the senior leadership team of the combined
company will include Mr. Moghadam and Mr. Rakowich as
co-chief executive officers, Mr. Sullivan as chief
financial officer, Mr. Olinger as chief integration
officer, Mr. Michael S. Curless as chief investment
officer, Mr. Guy F. Jaquier as CEO, Private Capital,
Mr. Gary E. Anderson as CEO, Europe & Asia,
Mr. Eugene F. Reilly as CEO, The Americas, Mr. Edward
S. Nekritz as chief legal officer and general counsel and
Ms. Nancy Hemmenway as chief human resources officer.
See The Merger Directors and Management
Following the Merger for additional information about
these interests.
6
Accounting
Treatment
(See
page 73)
AMB and ProLogis prepare their financial statements,
respectively, in accordance with accounting principles generally
accepted in the United States (which we refer to as
GAAP). The Merger will be accounted for by applying
the purchase method of accounting, with ProLogis treated as the
acquirer. See The Merger Accounting
Treatment.
Expected
Timing of the Merger
(See
page 79)
We currently expect to complete the Merger in the second quarter
of 2011, subject to receipt of required shareholder and
regulatory approvals and the satisfaction or waiver of the other
closing conditions summarized below. It is possible that factors
outside the control of both companies could result in the Merger
being completed at a later time, or not at all. There may be a
substantial amount of time between the respective AMB and
ProLogis special meetings and the completion of the Merger. AMB
and ProLogis hope to complete the Merger as soon as reasonably
practicable following the receipt of all required approvals.
Regulatory
Approvals Required for the Merger
(See
page 73)
Competition approvals for the Merger were sought and obtained in
Canada, Germany and Mexico. At any time before or after the
combination, the Antitrust Division of the U.S. Department
of Justice and the Federal Trade Commission, or a
U.S. state attorney general could take action under the
antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the Merger or seeking
divestiture of assets of AMB or ProLogis or their subsidiaries.
Private parties may also bring legal actions under the antitrust
laws under certain circumstances. While AMB and ProLogis do not
expect any such action to be taken, they can give no assurance
that a challenge to the Merger will not be made or, if made,
would be unsuccessful. See The Merger
Regulatory Approvals Required for the Merger.
Conditions
to Completion of the Merger
(See
page 87)
As more fully described in this joint proxy statement/prospectus
and in the merger agreement, the completion of the Merger
depends on a number of conditions being satisfied or, where
legally permissible, waived. These conditions include, among
others:
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receipt of the requisite approvals of AMB stockholders and
ProLogis shareholders;
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the approval for listing of shares of AMB common stock, AMB
Series R preferred stock and AMB Series S preferred
stock to be issued or reserved for issuance in connection with
the Merger on the NYSE;
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the SEC having declared effective the registration statement of
which this joint proxy statement/prospectus forms a part;
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the absence of any judgment or other legal prohibition or
binding order of any court or other governmental entity
prohibiting the Merger;
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the receipt of regulatory approvals required in connection with
the Merger;
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the correctness of all representations and warranties made by
the parties in the merger agreement and performance by the
parties of their obligations under the merger agreement (subject
in each case to certain materiality standards);
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the receipt of a legal opinion from tax counsel of ProLogis
regarding the qualification of the ProLogis merger as a
reorganization for U.S. federal income tax
purposes; and
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the receipt of legal opinions from the respective tax counsels
of AMB and ProLogis regarding the qualification of the Topco
merger as a reorganization for U.S. federal income tax
purposes and the qualification of each of the parties as a REIT.
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We cannot be certain when, or if, the conditions to the Merger
will be satisfied or waived, or that the Merger will be
completed.
7
Termination
of the Merger Agreement
(See
page 90)
The merger agreement may be terminated prior to the effective
time of the Merger, whether before or after the required
approvals of the AMB stockholders and ProLogis shareholders are
obtained:
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by mutual written consent of AMB and ProLogis;
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by either AMB or ProLogis, if the Merger is not consummated by
September 30, 2011;
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by either AMB or ProLogis, if a court or other governmental
entity issues a final and nonappealable order prohibiting the
Merger;
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by either AMB or ProLogis, if the required approvals of either
the AMB stockholders or the ProLogis shareholders are not
obtained;
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by either AMB or ProLogis, if there is a breach of the
representations or covenants of the other party that would
result in the failure of the related closing condition to be
satisfied, and such breach is not cured or is not curable by
September 30, 2011;
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by either AMB or ProLogis, if the board of the other party
changes its recommendation in favor of the Topco merger, in the
case of the board of AMB, or the ProLogis merger or Topco merger
in the case of the board of ProLogis;
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by either AMB or ProLogis, if the special meeting of the other
party is not called and held as required by the merger
agreement; or
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by either AMB or ProLogis, upon a material breach of the other
partys non-solicitation obligations under the merger
agreement.
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Expenses
and Termination Fees
(See
page 90)
Generally, all fees and expenses incurred in connection with the
Merger and the transactions contemplated by the merger agreement
will be paid by the party incurring those expenses. See
The Merger The Merger Agreement
Fees and Expenses. The merger agreement further provides
that, upon termination of the merger agreement under certain
circumstances, AMB may be obligated to pay ProLogis a
termination fee of $210 million, ProLogis may be obligated
to pay AMB a termination fee of $315 million and either
party may be obligated to reimburse up to $20 million of
the expenses of the other party. See The
Merger The Merger Agreement Termination
of the Merger Agreement for a complete discussion of the
circumstances under which termination fees will be required to
be paid.
No
Appraisal or Dissenters Rights
(See
page 75)
Under Maryland law, the holders of ProLogis common shares and
preferred shares and AMB common stock and preferred stock are
not entitled to appraisal rights in connection with the Merger.
See The Merger No Appraisal or
Dissenters Rights.
Litigation
Relating to the Merger
(See
page 75)
ProLogis, the members of the ProLogis board of trustees, New
Pumpkin, Upper Pumpkin, Pumpkin LLC, AMB and AMP LP have each
been named as defendants in lawsuits brought by holders of
ProLogis common shares challenging the Merger and seeking, among
other things, to enjoin the Merger, direct defendants to
exercise their fiduciary duties, rescind the merger agreement
and award the plaintiffs damages and expenses. The parties to
the lawsuits brought in Maryland have executed a memorandum of
understanding that embodies their agreement in principle on the
structure of a proposed settlement, and the parties to the
lawsuits brought in Colorado have also reached an agreement in
principle on a proposed settlement. ProLogis and AMB believe
that the claims are without merit and, absent court approval of
the proposed settlement, intend to vigorously defend against
these actions. See The Merger Litigation
Relating to the Merger for more information about
litigation related to the Merger.
8
Material
U.S. Federal Income Tax Consequences of the Merger (See
page 94)
Each of the ProLogis merger and the Topco merger is intended to
qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended (which we refer to as the Code), and the
merger agreement is intended to be and is adopted as a separate
plan of reorganization for each of the ProLogis
merger and the Topco merger for purposes of Sections 354
and 361 of the Code. Assuming each of the ProLogis merger and
the Topco merger qualifies as such a reorganization, a
U.S. holder of ProLogis common shares generally will not
recognize any gain or loss for U.S. federal income tax
purposes upon surrender of ProLogis common shares and receipt of
shares of AMB common stock, except with respect to cash received
in lieu of a fractional share of AMB common stock. It is a
condition to the completion of the Merger that ProLogis receive
a written opinion from its counsel to the effect that the
ProLogis merger will qualify as a reorganization within the
meaning of Section 368(a) of the Code, and that AMB and
ProLogis receive written opinions from their respective counsel
to the effect that the Topco merger will qualify as a
reorganization within the meaning of Section 368(a) of the
Code.
Tax matters are very complicated and the tax consequences of the
Merger to each ProLogis shareholder may depend on such
shareholders particular facts and circumstances. ProLogis
shareholders are urged to consult their tax advisors to
understand fully the tax consequences to them of the Merger. See
Material U.S. Federal Income Tax Consequences.
The AMB
Special Meeting (See page 116)
The AMB special meeting will be held at AMB Property
Corporations global headquarters, which are located at
Pier 1, Bay 1, San Francisco, California 94111, at
9:00 a.m., local time, on June 1, 2011. You may vote
at the AMB special meeting if you owned shares of AMB common
stock at the close of business on April 21, 2011, the
record date for the AMB special meeting. On that date, there
were 169,550,440 shares of AMB common stock outstanding and
entitled to vote. You may cast one vote for each share of AMB
common stock that you owned on that date.
At the AMB special meeting, AMB stockholders will be asked to
consider and vote upon:
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a proposal to approve the Topco merger (including the issuance
of AMB common stock and preferred stock to ProLogis shareholders
in connection with the Topco merger);
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a proposal to approve the bylaw amendment;
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a proposal to approve the charter amendment; and
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a proposal to adjourn the AMB special meeting, if necessary or
appropriate, to solicit additional proxies in favor of the
foregoing proposals.
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The approval of both the Topco merger (including the issuance of
AMB common stock and preferred stock to ProLogis shareholders in
connection with the Topco merger) and the bylaw amendment is
required for the completion of the Merger. The bylaw amendment
and the charter amendment will take effect only upon the
consummation of the Topco merger. However, approval of the
charter amendment is not a condition to completion of the Topco
merger.
The proposals at the AMB special meeting to approve the Topco
merger (including the issuance of AMB common stock and preferred
stock to ProLogis shareholders in connection with the Topco
merger) and to approve the charter amendment each require
approval by the affirmative vote of holders of two-thirds of the
outstanding AMB common stock. The proposal to approve the bylaw
amendment requires approval by the affirmative vote of holders
of a majority of the outstanding AMB common stock. The proposal
to adjourn the AMB special meeting, if necessary or appropriate,
to solicit additional proxies requires approval by the
affirmative vote of holders of a majority of the shares of AMB
common stock represented, in person or by proxy, at the AMB
special meeting and entitled to vote on the proposal.
As of April 21, 2011, the record date for the AMB special
meeting, approximately 2.5% of the outstanding shares of AMB
common stock were held by AMB directors and executive officers
and their affiliates. AMB currently expects that the AMB
directors and executive officers will vote their shares in favor
of the Topco merger
9
(including the issuance of AMB common stock and preferred stock
to ProLogis shareholders in connection with the Topco merger),
the bylaw amendment, the charter amendment and the AMB
adjournment proposal, although none has entered into any
agreements obligating them to do so.
The board of directors of AMB unanimously recommends that AMB
stockholders vote FOR all of the proposals
set forth above. See AMB Special Meeting for further
discussion of the AMB special meeting.
The
ProLogis Special Meeting (See page 123)
The special meeting of ProLogis shareholders will be held at
ProLogis world headquarters, 4545 Airport Way, Denver,
Colorado 80239, at 9:00 a.m., local time, on June 1,
2011. You may vote at the ProLogis special meeting if you owned
ProLogis common shares at the close of business on
April 21, 2011, the record date for the ProLogis special
meeting. On that date, there were 570,550,345 ProLogis common
shares outstanding and entitled to vote. You may cast one vote
for each ProLogis common share that you owned on that date.
At the ProLogis special meeting, shareholders of ProLogis will
be asked to consider and vote upon:
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a proposal to approve the Merger; and
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a proposal to adjourn the ProLogis special meeting, if necessary
or appropriate, to solicit additional proxies in favor of the
proposal to approve the Merger.
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The approval of the Merger requires the affirmative vote of the
holders of a majority of the outstanding ProLogis common shares.
The approval of the ProLogis adjournment proposal requires the
affirmative vote of a majority of the votes cast on the matter
by the holders of the ProLogis common shares represented, in
person or by proxy, at the ProLogis special meeting.
As of April 21, 2011, the record date for the ProLogis
special meeting, less than 1% of the outstanding common shares
of ProLogis were held by its trustees and executive officers and
their affiliates. ProLogis currently expects that the trustees
and executive officers of ProLogis will vote their shares in
favor of the Merger and the ProLogis adjournment proposal,
although none has entered into any agreements obligating them to
do so.
The ProLogis board of trustees unanimously recommends that
ProLogis shareholders vote FOR all of the
proposals set forth above. See ProLogis Special
Meeting for further discussion of the ProLogis special
meeting.
Rights of
ProLogis Shareholders Will Change as a Result of the Merger (See
page 137)
ProLogis shareholders will have different rights once they
become stockholders of the combined company, due to differences
between the governing documents of AMB and ProLogis. These
differences are described in detail under Comparison of
Rights of AMB Stockholders and ProLogis Shareholders.
Recent
Developments
ProLogis has an ownership interest in, and provides management
services to, ProLogis European Properties (which we refer to as
PEPR), a publicly traded real estate investment
fund. In April 2011, a group of third-party investors in PEPR
announced their interest in potentially acquiring ProLogis
ownership interest in PEPR at a price of 6 per ordinary
unit, and ProLogis management agreement with PEPR. On
April 12, 2011, ProLogis announced that it intended to
retain both its ownership interest in, and its management
agreement with, PEPR.
On April 14, 2011, ProLogis announced that it had purchased
additional ordinary units in PEPR from a third party, raising
ProLogis ownership interest in PEPR from approximately
33.1% to approximately 38.9% of the outstanding ordinary units.
Pursuant to applicable Luxembourg law, on April 22, 2011,
ProLogis commenced a tender offer to acquire any or all of the
outstanding ordinary units and convertible preferred units of
PEPR that it does not currently own. ProLogis has offered
6.10 per ordinary unit and 6.10 per convertible
preferred unit in cash, plus accrued and unpaid dividends. The
offer has no material conditions to closing and is expected to
expire on May 6, 2011. Pursuant to applicable Luxembourg
law, if all conditions to closing are met, ProLogis will be
required to acquire all units tendered into the tender offer on
the expiration date.
10
If all outstanding ordinary units and convertible preferred
units are tendered, the aggregate consideration to be paid by
ProLogis would be equal to approximately
730.1 million (or approximately $1.1 billion).
ProLogis expects to fund the purchase by drawing on its existing
global line of credit and with funds borrowed pursuant to a new
Senior Bridge Loan Agreement with J.P. Morgan Chase Bank,
N.A., an affiliate of J.P. Morgan, providing ProLogis with
the ability to borrow up to 500 million (or
approximately $730.9 million). Borrowings under the Senior
Bridge Loan Agreement will bear interest at a rate equal to the
rate at which Euro deposits in the Brussels interbank market are
quoted plus a margin based upon the credit rating for
ProLogis senior debt. Any borrowings under the Senior
Bridge Loan will mature in November 2011. The aggregate
consideration to be paid by ProLogis, and the resulting funding
requirement, will be proportionate to the percentage of units
not already owned by ProLogis tendered and acquired in the offer.
PEPRs financial position and results of operations and
cash flows currently are not consolidated with those of ProLogis
for financial reporting purposes, but ProLogis may be required
to so consolidate PEPR in the future depending on the amount, if
any, by which its ownership interest in PEPR increases. In
addition, ProLogis interest in PEPRs net book value
and net income or loss will increase to the extent of the
percentage of units, if any, that it acquires in the tender
offer. ProLogis intends to keep the management agreement between
ProLogis and PEPR in place if ProLogis does not succeed in
acquiring all of the outstanding units of PEPR.
11
SELECTED
HISTORICAL FINANCIAL DATA OF AMB
The following tables set forth selected consolidated financial
information for AMB. The selected financial data as of and for
the three months ended March 31, 2011 represents
preliminary operating and balance sheet data. AMBs results
of operations for the three months ended March 31, 2011 are
not necessarily indicative of results that may be expected for
any future period.
The selected statement of operations data for each of the years
in the five-year period ended December 31, 2010 and the
selected balance sheet data as of December 31 for each of the
years in the five-year period ended December 31, 2010 have
been derived from the consolidated financial statements of AMB
that were audited by PricewaterhouseCoopers LLP. The following
information should be read together with the consolidated
financial statements of AMB, the notes related thereto and the
related reports of management on the financial condition and
performance of AMB, all of which are contained in the reports of
AMB filed with the SEC and incorporated herein by reference. See
Where You Can Find More Information.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions, except per share amounts)
|
|
|
|
(Unaudited)
|
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Rental revenues
|
|
$
|
158
|
|
|
$
|
147
|
|
Private capital revenues
|
|
|
8
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
166
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses:
|
|
|
|
|
|
|
|
|
Property operating costs
|
|
|
52
|
|
|
|
48
|
|
Depreciation and amortization
|
|
|
55
|
|
|
|
47
|
|
General and administrative
|
|
|
31
|
|
|
|
32
|
|
Merger transaction costs and restructuring charges
|
|
|
4
|
|
|
|
3
|
|
Fund costs and other expenses
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
143
|
|
|
|
132
|
|
|
|
|
|
|
|
|
|
|
Other Income and Expenses:
|
|
|
|
|
|
|
|
|
Development profits, net of taxes
|
|
|
|
|
|
|
5
|
|
Earnings from unconsolidated joint ventures, net
|
|
|
8
|
|
|
|
4
|
|
Interest expense, amortization and other income, net
|
|
|
(34
|
)
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(3
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Income and gains from discontinued operations
|
|
|
17
|
|
|
|
1
|
|
Noncontrolling interests share of net income
|
|
|
(2
|
)
|
|
|
1
|
|
Preferred stock dividends & allocation to
participating securities
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
8
|
|
|
$
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share available to common
stockholders Basic
|
|
$
|
0.05
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share available to common
stockholders Diluted
|
|
$
|
0.05
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
168
|
|
|
|
149
|
|
Diluted
|
|
|
168
|
|
|
|
149
|
|
12
|
|
|
|
|
|
|
As of March 31, 2011
|
|
|
|
(In millions)
|
|
|
|
(Unaudited)
|
|
|
Balance Sheet Data:
|
|
|
|
|
Investments in real estate (at cost)
|
|
$
|
6,841
|
|
Total assets
|
|
$
|
7,421
|
|
Total debt
|
|
$
|
3,426
|
|
Total liabilities and noncontrolling interests
|
|
$
|
4,118
|
|
Preferred stock
|
|
$
|
223
|
|
Total stockholders equity (excluding preferred stock)
|
|
$
|
3,079
|
|
Number of common shares outstanding
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
|
(In millions, except per share amounts)
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
634
|
|
|
$
|
618
|
|
|
$
|
678
|
|
|
$
|
636
|
|
|
$
|
679
|
|
Income (loss) from continuing operations
|
|
$
|
9
|
|
|
$
|
(124
|
)
|
|
$
|
(18
|
)
|
|
$
|
282
|
|
|
$
|
210
|
|
Income from discontinued operations
|
|
$
|
24
|
|
|
$
|
96
|
|
|
$
|
11
|
|
|
$
|
90
|
|
|
$
|
78
|
|
Net income (loss) before cumulative effect of change in
accounting principle
|
|
$
|
34
|
|
|
$
|
(28
|
)
|
|
$
|
(7
|
)
|
|
$
|
372
|
|
|
$
|
289
|
|
Net income (loss)
|
|
$
|
34
|
|
|
$
|
(28
|
)
|
|
$
|
(7
|
)
|
|
$
|
372
|
|
|
$
|
289
|
|
Net income (loss) available to common stockholders
|
|
$
|
10
|
|
|
$
|
(50
|
)
|
|
$
|
(66
|
)
|
|
$
|
294
|
|
|
$
|
208
|
|
(Loss) income from continuing operations available to common
stockholders per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.08
|
)
|
|
$
|
(1.01
|
)
|
|
$
|
(0.77
|
)
|
|
$
|
2.17
|
|
|
$
|
1.54
|
|
Diluted
|
|
$
|
(0.08
|
)
|
|
$
|
(1.01
|
)
|
|
$
|
(0.77
|
)
|
|
$
|
2.12
|
|
|
$
|
1.49
|
|
Income from discontinued operations available to common
stockholders per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.14
|
|
|
$
|
0.64
|
|
|
$
|
0.09
|
|
|
$
|
0.85
|
|
|
$
|
0.83
|
|
Diluted
|
|
$
|
0.14
|
|
|
$
|
0.64
|
|
|
$
|
0.09
|
|
|
$
|
0.83
|
|
|
$
|
0.80
|
|
Net income (loss) available to common stockholders per common
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.06
|
|
|
$
|
(0.37
|
)
|
|
$
|
(0.68
|
)
|
|
$
|
3.02
|
|
|
$
|
2.37
|
|
Diluted
|
|
$
|
0.06
|
|
|
$
|
(0.37
|
)
|
|
$
|
(0.68
|
)
|
|
$
|
2.95
|
|
|
$
|
2.29
|
|
Cash dividends per common shares
|
|
$
|
1.12
|
|
|
$
|
1.12
|
|
|
$
|
1.56
|
|
|
$
|
2.00
|
|
|
$
|
1.84
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
162
|
|
|
|
134
|
|
|
|
97
|
|
|
|
97
|
|
|
|
88
|
|
Diluted
|
|
|
162
|
|
|
|
134
|
|
|
|
97
|
|
|
|
100
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
|
(In millions)
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in real estate (at cost)
|
|
$
|
6,906
|
|
|
$
|
6,709
|
|
|
$
|
6,604
|
|
|
$
|
6,710
|
|
|
$
|
6,576
|
|
Total assets
|
|
$
|
7,373
|
|
|
$
|
6,842
|
|
|
$
|
7,302
|
|
|
$
|
7,262
|
|
|
$
|
6,714
|
|
Total debt
|
|
$
|
3,331
|
|
|
$
|
3,213
|
|
|
$
|
3,990
|
|
|
$
|
3,495
|
|
|
$
|
3,437
|
|
Total liabilities and noncontrolling interests
|
|
$
|
4,052
|
|
|
$
|
3,902
|
|
|
$
|
4,787
|
|
|
$
|
4,498
|
|
|
$
|
4,547
|
|
Preferred stock
|
|
$
|
223
|
|
|
$
|
223
|
|
|
$
|
223
|
|
|
$
|
223
|
|
|
$
|
223
|
|
Total stockholders equity (excluding preferred stock)
|
|
$
|
3,097
|
|
|
$
|
2,717
|
|
|
$
|
2,292
|
|
|
$
|
2,541
|
|
|
$
|
1,943
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In millions)
|
|
|
Funds from operations (FFO), as
adjusted(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
10
|
|
|
$
|
(50
|
)
|
|
$
|
(66
|
)
|
|
$
|
294
|
|
|
$
|
208
|
|
Gains from sale or contribution of real estate interests, net
|
|
|
(20
|
)
|
|
|
(39
|
)
|
|
|
(23
|
)
|
|
|
(86
|
)
|
|
|
(45
|
)
|
Total depreciation and amortization
|
|
|
190
|
|
|
|
174
|
|
|
|
162
|
|
|
|
158
|
|
|
|
176
|
|
Adjustments to derive FFO, as defined by NAREIT from
consolidated joint ventures
|
|
|
(22
|
)
|
|
|
(17
|
)
|
|
|
(19
|
)
|
|
|
(22
|
)
|
|
|
(35
|
)
|
Adjustments to derive FFO, as defined by NAREIT from
unconsolidated joint ventures
|
|
|
43
|
|
|
|
32
|
|
|
|
26
|
|
|
|
20
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations, as defined by
NAREIT(1)
|
|
$
|
201
|
|
|
$
|
100
|
|
|
$
|
80
|
|
|
$
|
364
|
|
|
$
|
297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for impairment charges, restructuring charges,
preferred unit redemption (discount) premium and debt
extinguishment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate impairment
losses(2)
|
|
|
1
|
|
|
|
182
|
|
|
|
194
|
|
|
|
1
|
|
|
|
6
|
|
Pursuit costs and tax reserve
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
Restructuring charges
|
|
|
5
|
|
|
|
6
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt
|
|
|
3
|
|
|
|
12
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Preferred unit redemption (discount) premium
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
3
|
|
|
|
1
|
|
Allocation to participating securities
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO, as
adjusted(1)
|
|
$
|
210
|
|
|
$
|
289
|
|
|
$
|
298
|
|
|
$
|
368
|
|
|
$
|
303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMBs share of development profits, net of taxes
|
|
|
(7
|
)
|
|
|
(88
|
)
|
|
|
(77
|
)
|
|
|
(168
|
)
|
|
|
(106
|
)
|
Allocation to participating securities
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core funds from operations (Core FFO), as
adjusted(1)
|
|
$
|
203
|
|
|
$
|
201
|
|
|
$
|
222
|
|
|
$
|
201
|
|
|
$
|
198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
253
|
|
|
$
|
243
|
|
|
$
|
303
|
|
|
$
|
241
|
|
|
$
|
336
|
|
Investing activities
|
|
$
|
(587
|
)
|
|
$
|
84
|
|
|
$
|
(882
|
)
|
|
$
|
(632
|
)
|
|
$
|
(881
|
)
|
Financing activities
|
|
$
|
330
|
|
|
$
|
(298
|
)
|
|
$
|
580
|
|
|
$
|
420
|
|
|
$
|
484
|
|
|
|
|
(1)
|
|
AMB believes that net income, as
defined by GAAP, is the most appropriate earnings measure.
However, AMB considers funds from operations, as adjusted
(FFO, as adjusted), funds from operations, as
defined by NAREIT (FFO, as defined by NAREIT) and
core funds from operations, as adjusted (Core FFO, as
adjusted, which together with FFO, as adjusted and FFO, as
defined by NAREIT, we refer to as the FFO Measures, as
adjusted) to be useful supplemental measures of its
operating performance. AMB calculates FFO, as adjusted, as net
income (or loss) available to common stockholders, calculated in
accordance with GAAP, less gains (or losses) from dispositions
of real estate held for investment purposes and real
estate-related depreciation, and adjustments to derive
AMBs pro rata share of FFO, as adjusted, of consolidated
and unconsolidated joint ventures. AMB calculates Core FFO, as
adjusted, as FFO, as adjusted excluding the share of development
profits of AMB. These calculations also include adjustments for
items as described below.
|
|
|
|
Unless stated otherwise, AMB
includes the gains from development, including those from
value-added conversion projects, before depreciation recapture,
as a component of FFO, as adjusted. AMB believes gains from
development should be included in FFO, as adjusted, to more
completely reflect the performance of one of our lines of
business. AMB believes that value-added conversion dispositions
are in substance land sales and as such should be included in
FFO, as adjusted, consistent with the real estate investment
trust industrys long standing practice to include gains on
the sale of land in funds from operations. However, AMBs
interpretation of FFO, as adjusted, may not be consistent with
the views of others in the real estate investment trust
industry, who may consider it to be a divergence from the
National Association of Real Estate Investment Trusts
(NAREIT) definition, and may not be comparable to
funds from operations or funds from operations per share
reported by other real estate investment trusts that interpret
the current NAREIT definition differently than AMB does. In
connection with the formation of a joint venture, AMB
|
14
|
|
|
|
|
may warehouse assets that are
acquired with the intent to contribute these assets to the newly
formed venture. Some of the properties held for contribution
may, under certain circumstances, be required to be depreciated
under GAAP. AMB includes in its calculation of FFO, as adjusted,
gains or losses related to the contribution of previously
depreciated real estate to joint ventures. Although it is a
departure from the current NAREIT definition, AMB believes such
calculation of FFO, as adjusted, better reflects the value
created as a result of the contributions.
|
|
|
|
|
|
In addition, AMB calculates FFO, as
adjusted, to exclude impairment and restructuring charges, debt
extinguishment losses and preferred unit redemption
discounts/premiums. The impairment charges were principally a
result of increases in estimated capitalization rates and
deterioration in market conditions that adversely impacted
values. The restructuring charges reflected costs associated
with the reduction in global headcount and cost structure of
AMB. Debt extinguishment losses generally included the costs of
repurchasing debt securities. AMB repurchased certain tranches
of senior unsecured debt to manage its debt maturities in
response to the current financing environment, resulting in
greater debt extinguishment costs. The preferred unit redemption
discounts/premiums reflect the gain/loss associated with the
liquidation preference in the preferred unit redemption price
less costs incurred as a result of the redemption. In 2008, AMB
also recognized charges to write-off pursuit costs related to
development projects it no longer planned to commence and to
establish a reserve against tax assets associated with the
reduction of its development activities. Although difficult to
predict, these items may be recurring given the uncertainty of
the current economic climate and its adverse effects on the real
estate and financial markets. While not infrequent or unusual in
nature, these items result from market fluctuations that can
have inconsistent effects on the results of operations of AMB.
The economics underlying these items reflect market and
financing conditions in the short-term but can obscure the
performance of AMB and the value of the long-term investment
decisions and strategies of AMB. AMB management believes FFO, as
adjusted, is significant and useful to both it and its
investors. FFO, as adjusted, more appropriately reflects the
value and strength of the business model of AMB and its
potential performance isolated from the volatility of the
current economic environment and unobscured by costs (or gains)
resulting from the management of AMB of its financing profile in
response to the tightening of the capital markets. However, in
addition to the limitations of the FFO Measures, as adjusted,
generally discussed below, FFO, as adjusted, does not present a
comprehensive measure of the financial condition and operating
performance of AMB. This measure is a modification of the NAREIT
definition of funds from operations and should not be used as an
alternative to net income or cash flow from operations as
defined by GAAP.
|
|
|
|
AMB believes that the FFO Measures,
as adjusted, are meaningful supplemental measures of its
operating performance because historical cost accounting for
real estate assets in accordance with GAAP implicitly assumes
that the value of real estate assets diminishes predictably over
time, as reflected through depreciation and amortization
expenses. However, since real estate values have historically
risen or fallen with market and other conditions, many industry
investors and analysts have considered presentation of operating
results for real estate companies that use historical cost
accounting to be insufficient. Thus, the FFO Measures, as
adjusted, are supplemental measures of operating performance for
real estate investment trusts that exclude historical cost
depreciation and amortization, among other items, from net
income available to common stockholders, as defined by GAAP. AMB
believes that the use of the FFO Measures, as adjusted, combined
with the required GAAP presentations, has been beneficial in
improving the understanding of operating results of real estate
investment trusts among the investing public and making
comparisons of operating results among such companies more
meaningful. AMB considers the FFO Measures, as adjusted, to be
useful measures for reviewing comparative operating and
financial performance because, by excluding gains or losses
related to sales of previously depreciated operating real estate
assets and real estate depreciation and amortization, the FFO
Measures, as adjusted, can help the investing public compare the
operating performance of a companys real estate between
periods or as compared to other companies. While funds from
operations is a relevant and widely used measure of operating
performance of real estate investment trusts, the FFO Measures,
as adjusted, do not represent cash flow from operations or net
income as defined by GAAP and should not be considered as
alternatives to those measures in evaluating the liquidity or
operating performance of AMB. The FFO Measures, as adjusted,
also do not consider the costs associated with capital
expenditures related to the real estate assets of AMB nor are
the FFO Measures, as adjusted, necessarily indicative of cash
available to fund the future cash requirements of AMB. AMB
management compensates for the limitations of the FFO Measures,
as adjusted, by providing investors with financial statements
prepared according to GAAP, along with this detailed discussion
of the FFO Measures, as adjusted, and a reconciliation of the
FFO Measures, as adjusted, to net income available to common
stockholders, a GAAP measurement.
|
|
(2)
|
|
Includes adjustments for AMBs
share of real estate impairment losses from unconsolidated and
consolidated joint ventures.
|
15
SELECTED
HISTORICAL FINANCIAL DATA OF PROLOGIS
The following tables set forth selected consolidated financial
information for ProLogis. The selected financial data as of and
for the three months ended March 31, 2011 represents
preliminary operating and financial condition data.
ProLogis results of operations for the three months ended
March 31, 2011 are not necessarily indicative of results
that may be expected for any future period.
The selected data presented below under the captions
Operating Data, Common Share
Distributions, Cash Flow Data and
Financial Position for, and as of the end of, each
of the years in the five-year period ended December 31,
2010, are derived from the consolidated financial statements of
ProLogis and subsidiaries, which financial statements have been
audited by KPMG LLP, an independent registered public accounting
firm. The information presented below under the caption
FFO is not included in the consolidated financial
statements. The consolidated financial statements and schedule
as of December 31, 2010 and 2009, and for each of the years
in the three-year period ended December 31, 2010, and the
reports thereon, are incorporated by reference in this joint
proxy statement/prospectus. The following information should be
read together with the consolidated financial statements of
ProLogis, the notes related thereto and the related reports of
management on the financial condition and performance of
ProLogis, all of which are contained in the reports of ProLogis
filed with the SEC and incorporated herein by reference. See
Where You Can Find More Information.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions, except per share amounts)
|
|
|
|
(Unaudited)
|
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
205.3
|
|
|
$
|
187.5
|
|
Property management fees and other income
|
|
|
33.5
|
|
|
|
29.8
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
238.8
|
|
|
|
217.3
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Rental expenses
|
|
|
63.3
|
|
|
|
56.3
|
|
Investment management expenses
|
|
|
10.6
|
|
|
|
10.3
|
|
General and administrative
|
|
|
39.2
|
|
|
|
42.0
|
|
Merger integration expenses and reduction in workforce
|
|
|
6.0
|
|
|
|
|
|
Depreciation and other
|
|
|
87.3
|
|
|
|
79.4
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
206.4
|
|
|
|
188.0
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
32.4
|
|
|
|
29.3
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Earnings from unconsolidated investees, net
|
|
|
13.6
|
|
|
|
8.0
|
|
Loss on early extinguishment of debt
|
|
|
|
|
|
|
(47.6
|
)
|
Net gains on dispositions of investments in real estate
|
|
|
3.7
|
|
|
|
11.8
|
|
Interest, income taxes and other income (expenses), net
|
|
|
(98.1
|
)
|
|
|
(114.8
|
)
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(48.4
|
)
|
|
|
(113.3
|
)
|
Income from discontinued operations
|
|
|
8.2
|
|
|
|
28.8
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
$
|
(40.2
|
)
|
|
$
|
(84.5
|
)
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common shares
|
|
$
|
(46.6
|
)
|
|
$
|
(91.1
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to common shares
Basic
|
|
$
|
(0.08
|
)
|
|
$
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to common shares
Diluted
|
|
$
|
(0.08
|
)
|
|
$
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
570.6
|
|
|
|
475.0
|
|
Diluted
|
|
|
570.6
|
|
|
|
475.0
|
|
16
|
|
|
|
|
|
|
As of March 31, 2011
|
|
|
|
(In millions)
|
|
|
|
(Unaudited)
|
|
|
Financial Position
|
|
|
|
|
Real estate properties owned, excluding land held for
development, before depreciation
|
|
$
|
11,541.5
|
|
Land held for development or targeted for disposition
|
|
$
|
1,600.0
|
|
Net investments in properties
|
|
$
|
11,484.7
|
|
Investments in and advances to unconsolidated investees
|
|
$
|
2,084.7
|
|
Total assets
|
|
$
|
14,935.7
|
|
Total debt
|
|
$
|
6,415.0
|
|
Total liabilities
|
|
$
|
7,309.3
|
|
Noncontrolling interests
|
|
$
|
17.7
|
|
ProLogis shareholders equity
|
|
$
|
7,608.7
|
|
Number of common shares outstanding
|
|
|
570.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In millions, except per share amounts)
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues(1)
|
|
$
|
909
|
|
|
$
|
1,055
|
|
|
$
|
5,396
|
|
|
$
|
5,944
|
|
|
$
|
2,209
|
|
Total
expenses(1)
|
|
$
|
1,503
|
|
|
$
|
1,089
|
|
|
$
|
4,897
|
|
|
$
|
4,922
|
|
|
$
|
1,556
|
|
Operating income
(loss)(1)(2)
|
|
$
|
(594
|
)
|
|
$
|
(35
|
)
|
|
$
|
500
|
|
|
$
|
1,022
|
|
|
$
|
654
|
|
Interest expense
|
|
$
|
461
|
|
|
$
|
373
|
|
|
$
|
385
|
|
|
$
|
389
|
|
|
$
|
294
|
|
Earnings (loss) from continuing
operations(2)
|
|
$
|
(1,582
|
)
|
|
$
|
(346
|
)
|
|
$
|
(359
|
)
|
|
$
|
853
|
|
|
$
|
609
|
|
Discontinued operations
|
|
$
|
311
|
|
|
$
|
370
|
|
|
$
|
(91
|
)
|
|
$
|
205
|
|
|
$
|
269
|
|
Consolidated net earnings
(loss)(2)
|
|
$
|
(1,270
|
)
|
|
$
|
24
|
|
|
$
|
(450
|
)
|
|
$
|
1,058
|
|
|
$
|
878
|
|
Net earnings (loss) attributable to common
shares(2)
|
|
$
|
(1,296
|
)
|
|
$
|
(3
|
)
|
|
$
|
(479
|
)
|
|
$
|
1,028
|
|
|
$
|
849
|
|
Net earnings (loss) per share attributable to common shares
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(3.27
|
)
|
|
$
|
(0.93
|
)
|
|
$
|
(1.48
|
)
|
|
$
|
3.20
|
|
|
$
|
2.36
|
|
Discontinued operations
|
|
|
0.63
|
|
|
|
0.92
|
|
|
|
(0.34
|
)
|
|
|
0.80
|
|
|
|
1.09
|
|
|
|
|
|
|
|
Net earnings (loss) per share attributable to common shares -
Basic(2)
|
|
$
|
(2.64
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(1.82
|
)
|
|
$
|
4.00
|
|
|
$
|
3.45
|
|
|
|
|
|
|
|
Net earnings (loss) per share attributable to common shares -
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(3.27
|
)
|
|
$
|
(0.93
|
)
|
|
$
|
(1.48
|
)
|
|
$
|
3.09
|
|
|
$
|
2.27
|
|
Discontinued operations
|
|
|
0.63
|
|
|
|
0.92
|
|
|
|
(0.34
|
)
|
|
|
0.77
|
|
|
|
1.05
|
|
|
|
|
|
|
|
Net earnings (loss) per share attributable to common shares
Diluted(2)
|
|
$
|
(2.64
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(1.82
|
)
|
|
$
|
3.86
|
|
|
$
|
3.32
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
492
|
|
|
|
403
|
|
|
|
263
|
|
|
|
257
|
|
|
|
246
|
|
Diluted
|
|
|
492
|
|
|
|
403
|
|
|
|
263
|
|
|
|
267
|
|
|
|
257
|
|
Common Share Distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common share cash distributions paid
|
|
$
|
281
|
|
|
$
|
272
|
|
|
$
|
543
|
|
|
$
|
473
|
|
|
$
|
393
|
|
Common share distributions paid per share
|
|
$
|
0.56
|
|
|
$
|
0.70
|
|
|
$
|
2.07
|
|
|
$
|
1.84
|
|
|
$
|
1.60
|
|
FFO(3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net earnings (loss) to FFO:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) attributable to common
shares(2)
|
|
$
|
(1,296
|
)
|
|
$
|
(3
|
)
|
|
$
|
(479
|
)
|
|
$
|
1,028
|
|
|
$
|
849
|
|
Total NAREIT defined adjustments
|
|
|
241
|
|
|
|
213
|
|
|
|
449
|
|
|
|
150
|
|
|
|
149
|
|
|
|
|
|
|
|
FFO, as defined by NAREIT
|
|
|
(1,055
|
)
|
|
|
210
|
|
|
|
(30
|
)
|
|
|
1,178
|
|
|
|
998
|
|
Our defined adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange losses (gains), net
|
|
|
11
|
|
|
|
(58
|
)
|
|
|
144
|
|
|
|
16
|
|
|
|
(19
|
)
|
Current income tax expense
|
|
|
|
|
|
|
4
|
|
|
|
10
|
|
|
|
3
|
|
|
|
23
|
|
Deferred income tax expense (benefit)
|
|
|
(52
|
)
|
|
|
(23
|
)
|
|
|
4
|
|
|
|
1
|
|
|
|
(54
|
)
|
Our share of reconciling items from unconsolidated investees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange losses (gains), net
|
|
|
(9
|
)
|
|
|
(2
|
)
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
Unrealized losses (gains) on derivative contracts, net
|
|
|
4
|
|
|
|
(8
|
)
|
|
|
23
|
|
|
|
|
|
|
|
|
|
Deferred income tax expense (benefit)
|
|
|
|
|
|
|
16
|
|
|
|
(19
|
)
|
|
|
6
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In millions, except per share amounts)
|
|
|
|
|
|
|
|
FFO attributable to common shares as defined by ProLogis,
including significant non-cash items
|
|
|
(1,101
|
)
|
|
|
139
|
|
|
|
134
|
|
|
|
1,206
|
|
|
|
945
|
|
Add (deduct) significant non-cash items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of real estate
properties(2)
|
|
|
824
|
|
|
|
331
|
|
|
|
275
|
|
|
|
|
|
|
|
|
|
Impairment of goodwill and other
assets(2)
|
|
|
413
|
|
|
|
164
|
|
|
|
321
|
|
|
|
|
|
|
|
|
|
Impairment (net gain) related to China operations
|
|
|
|
|
|
|
(3
|
)
|
|
|
198
|
|
|
|
|
|
|
|
|
|
Loss (gain) on early extinguishment of debt
|
|
|
31
|
|
|
|
(172
|
)
|
|
|
(91
|
)
|
|
|
|
|
|
|
|
|
Write-off deferred financing fees associated with credit
facility restructuring
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our share of certain losses recognized by the property funds, net
|
|
|
11
|
|
|
|
9
|
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO attributable to common shares as defined by ProLogis,
excluding significant non-cash items
|
|
$
|
186
|
|
|
$
|
468
|
|
|
$
|
945
|
|
|
$
|
1,206
|
|
|
$
|
945
|
|
|
|
|
|
|
|
Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities(1)
|
|
$
|
241
|
|
|
$
|
89
|
|
|
$
|
888
|
|
|
$
|
1,230
|
|
|
$
|
664
|
|
Net cash provided by (used in) investing activities
|
|
$
|
733
|
|
|
$
|
1,235
|
|
|
$
|
(1,347
|
)
|
|
$
|
(4,076
|
)
|
|
$
|
(2,047
|
)
|
Net cash provided by (used in) financing activities
|
|
$
|
(970
|
)
|
|
$
|
(1,463
|
)
|
|
$
|
358
|
|
|
$
|
2,742
|
|
|
$
|
1,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008(1)
|
|
|
2007(1)
|
|
|
2006
|
|
|
|
(in millions)
|
|
|
Financial Position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate properties owned, excluding land held for
development, before depreciation
|
|
$
|
11,346
|
|
|
$
|
12,606
|
|
|
$
|
13,234
|
|
|
$
|
14,414
|
|
|
$
|
12,482
|
|
Land held for development or targeted for
disposition(2)
|
|
$
|
1,534
|
|
|
$
|
2,574
|
|
|
$
|
2,483
|
|
|
$
|
2,153
|
|
|
$
|
1,397
|
|
Net investments in properties
|
|
$
|
11,284
|
|
|
$
|
13,508
|
|
|
$
|
14,134
|
|
|
$
|
15,199
|
|
|
$
|
12,615
|
|
Investments in and advances to unconsolidated investees
|
|
$
|
2,025
|
|
|
$
|
2,107
|
|
|
$
|
2,195
|
|
|
$
|
2,252
|
|
|
$
|
1,300
|
|
Total assets
|
|
$
|
14,903
|
|
|
$
|
16,797
|
|
|
$
|
19,210
|
|
|
$
|
19,652
|
|
|
$
|
15,827
|
|
Total debt
|
|
$
|
6,506
|
|
|
$
|
7,978
|
|
|
$
|
10,711
|
|
|
$
|
10,217
|
|
|
$
|
8,387
|
|
Total liabilities
|
|
$
|
7,382
|
|
|
$
|
8,790
|
|
|
$
|
12,452
|
|
|
$
|
11,848
|
|
|
$
|
9,376
|
|
Noncontrolling interests
|
|
$
|
15
|
|
|
$
|
20
|
|
|
$
|
20
|
|
|
$
|
79
|
|
|
$
|
52
|
|
ProLogis shareholders equity
|
|
$
|
7,505
|
|
|
$
|
7,987
|
|
|
$
|
6,738
|
|
|
$
|
7,725
|
|
|
$
|
6,399
|
|
Number of common shares outstanding
|
|
|
570
|
|
|
|
474
|
|
|
|
267
|
|
|
|
258
|
|
|
|
251
|
|
|
|
|
(1) |
|
During 2010 and 2009, ProLogis
contributed certain properties with any resulting gain or loss
reflected as net gains in the Consolidated Statements of
Operations of ProLogis and as cash provided by investing
activities. In 2008 and previous years, ProLogis reflected these
contributions as gross revenues and expenses as cash provided by
operating activities. See the Consolidated Financial Statements
of ProLogis contained in Item 8 of ProLogis
Form 10-K
for the year ended December 31, 2010 for more information.
|
|
(2) |
|
During 2010, ProLogis recognized
impairment charges of $824.3 million on certain of its real
estate properties, which includes $87.7 million in
Discontinued Operations and $412.7 million related to
goodwill and other assets. During 2009, ProLogis recognized
impairment charges of $331.6 million on certain of its real
estate properties and $163.6 million related to goodwill
and other assets. During 2008, ProLogis recognized impairment
charges of $274.7 million on certain of its real estate
properties and $320.6 million related to goodwill and other
assets. In addition, during 2008, ProLogis recognized impairment
charges of $198.2 million in Discontinued Operations
related to the net assets of ProLogis China operations
that were reclassified as held for sale and its share of
impairment charges recorded by an unconsolidated investee of
$108.2 million. See ProLogis Consolidated Financial
Statements contained in Item 8 of ProLogis
Form 10-K
for the year ended December 31, 2010 in for more
information.
|
|
(3) |
|
Funds from operations
(FFO) is a non-GAAP measure that is commonly used in
the real estate industry. The most directly comparable GAAP
measure to FFO is net earnings. Although the NAREIT has
published a definition of FFO, modifications to the NAREIT
calculation of FFO are common among REITs, as companies seek to
provide financial measures that meaningfully reflect their
business. FFO, as ProLogis defines it, is presented as a
supplemental financial measure. FFO is not used by ProLogis as,
nor should it be considered to be, an alternative to net
earnings computed under GAAP as an indicator of the operating
performance of ProLogis or as an alternative to cash from
operating activities computed under GAAP as an indicator of the
ability of ProLogis to fund its cash needs.
|
18
|
|
|
|
|
FFO is not meant to represent a
comprehensive system of financial reporting and does not
present, nor does ProLogis intend it to present, a complete
picture of its financial condition and operating performance.
ProLogis believes net earnings computed under GAAP remains the
primary measure of performance and that FFO is only meaningful
when it is used in conjunction with net earnings computed under
GAAP. Further, ProLogis believes that its consolidated financial
statements, prepared in accordance with GAAP, provide the most
meaningful picture of its financial condition and operating
performance.
|
|
|
|
At the same time that NAREIT
created and defined its FFO concept for the REIT industry, it
also recognized that management of each of its member
companies has the responsibility and authority to publish
financial information that it regards as useful to the financial
community. ProLogis believes that financial analysts,
potential investors and shareholders who review the operating
results of ProLogis are best served by a defined FFO measure
that includes other adjustments to net earnings computed under
GAAP in addition to those included in the NAREIT defined measure
of FFO. The FFO measures of ProLogis are discussed in
Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations Funds
From Operations in its Annual Report on
Form 10-K
for its fiscal year ended December 31, 2010 which is
incorporated into this joint proxy statement/prospectus by
reference. See Where You Can Find More Information.
|
19
SUMMARY
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION
The following table shows summary unaudited pro forma combined
condensed financial information about the combined financial
condition and operating results after giving effect to the
Merger. The unaudited pro forma combined condensed financial
information assumes that the Merger is accounted for by applying
the purchase method of accounting with ProLogis treated as the
acquirer. The unaudited pro forma combined condensed balance
sheet data gives effect to the Merger as if it had occurred on
December 31, 2010. The unaudited pro forma combined
condensed statement of operations data gives effect to the
Merger as if it had become effective at January 1, 2010,
based on the most recent valuation data available. The summary
unaudited pro forma combined condensed financial information
listed below has been derived from and should be read in
conjunction with (i) the more detailed unaudited pro forma
combined condensed financial information, including the notes
thereto, appearing elsewhere in this joint proxy
statement/prospectus and (ii) the consolidated financial
statements and the related notes of both AMB and ProLogis
contained in their respective Annual Reports on
Form 10-K
for the year ended December 31, 2010, all of which are
incorporated by reference into this joint proxy
statement/prospectus. See Unaudited Pro Forma Combined
Condensed Financial Information and Where You Can
Find More Information:
The unaudited pro forma combined condensed financial information
is presented for illustrative purposes only and is not
necessarily indicative of the combined operating results or
financial position that would have occurred if such transactions
had been consummated on the dates and in accordance with the
assumptions described herein, nor is it necessarily indicative
of the future operating results or financial position of the
combined company. The unaudited pro forma combined condensed
financial information does not give effect to (i) any
potential revenue enhancements or cost synergies that could
result from the Merger or (ii) any transaction or
integration costs relating to the Merger. In addition, as
explained in more detail in the accompanying notes to the
unaudited pro forma combined condensed financial information,
the preliminary allocation of the pro forma purchase price
reflected in the unaudited pro forma combined condensed
financial information is subject to adjustment and may vary
significantly from the definitive allocation of the final
purchase price that will be recorded subsequent to completion of
the Merger. The determination of the final purchase price will
be based on the trading price of ProLogis common shares at
closing.
|
|
|
|
|
|
|
December 31, 2010
|
|
|
(In millions, except
|
|
|
per share amounts)
|
|
Operating Data:
|
|
|
|
|
Total revenues
|
|
$
|
1,536
|
|
Operating loss
|
|
$
|
(495
|
)
|
Loss from continuing operations
|
|
$
|
(1,575
|
)
|
Loss from continuing operations attributable to common shares
|
|
$
|
(1,621
|
)
|
Loss from continuing operations per share attributable to
common shares:
|
|
|
|
|
Basic
|
|
$
|
(3.89
|
)
|
Diluted
|
|
$
|
(3.89
|
)
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
Net investments in real estate
|
|
$
|
23,742
|
|
Total assets
|
|
$
|
25,581
|
|
Total debt
|
|
$
|
9,906
|
|
ProLogis, Inc. shareholders equity
|
|
$
|
13,626
|
|
20
EQUIVALENT
AND COMPARATIVE PER SHARE INFORMATION
The following table sets forth, for the year ended
December 31, 2010, selected per share information for
ProLogis common shares on a historical and pro forma combined
basis and for AMB common stock on a historical and pro forma
equivalent basis. You should read the table below together with
the historical consolidated financial statements and related
notes of AMB and ProLogis contained in their respective Annual
Reports on
Form 10-K
for the year ended December 31, 2010, all of which are
incorporated by reference into this joint proxy
statement/prospectus. See Where You Can Find More
Information.
The ProLogis pro forma combined loss per share was calculated
using the methodology as described below under the heading
Unaudited Pro Forma Combined Condensed Financial
Information, and are subject to all the assumptions,
adjustments and limitations described thereunder. The pro forma
financial information described below is presented as if the
Merger occurred on January 1, 2010 for the results of
operations and December 31, 2010 for financial position. As
this is a reverse acquisition, the AMB pro forma equivalent per
common share amounts were calculated by multiplying the ProLogis
pro forma combined per share amounts by 40%, representing the
approximate share of the combined company that will be owned by
pre-Merger shareholders of AMB. You should not rely on the pro
forma amounts as being indicative of the financial position or
results of operations of the combined company that actually
would have occurred had the Merger been completed as of the
dates indicated above, nor is it necessarily indicative of the
future operating results or financial position of the combined
company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ProLogis
|
|
AMB
|
|
|
|
|
Pro Forma
|
|
|
|
Pro Forma
|
|
|
Historical
|
|
Combined
|
|
Historical
|
|
Equivalent
|
|
Loss from continuing operations available to common share, per
common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(3.27
|
)
|
|
$
|
(3.89
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(1.56
|
)
|
Diluted
|
|
$
|
(3.27
|
)
|
|
$
|
(3.89
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(1.56
|
)
|
Dividends declared per common share
|
|
$
|
0.56
|
|
|
$
|
0.56
|
|
|
$
|
1.12
|
|
|
$
|
0.22
|
|
Book value per common share
|
|
$
|
12.55
|
|
|
$
|
30.80
|
|
|
$
|
18.36
|
|
|
$
|
12.32
|
|
21
RATIO OF
EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to combined
fixed charges and preferred stock dividends of AMB for the
periods indicated. The ratio of earnings to combined fixed
charges and preferred stock dividends was computed by dividing
the earnings of AMB by its combined fixed charges and preferred
stock dividends. For purposes of calculating these ratios,
earnings includes pretax income from continuing
operations before extraordinary items, excluding the equity
earnings in a less than 50% owned subsidiary, plus fixed charges
and reduced by capitalized interest. Fixed charges
consists of interest expensed and capitalized and the amortized
premiums, discounts and capitalized expenses related to
indebtedness.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
|
(Dollars in millions)
|
|
Consolidated ratio of earnings to combined fixed charges and
preferred stock
dividends(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.9
|
|
|
|
1.5
|
|
|
|
|
(1) |
|
The consolidated ratio of earnings
to combined fixed charges and preferred stock dividends was less
than
one-to-one
for the years ended December 31, 2010, 2009 and 2008. For
the years ended December 31, 2010, 2009 and 2008, earnings
were insufficient to cover combined fixed charges and preferred
stock dividends by $40.8 million, $183.1 million and
$100.4 million, respectively.
|
22
RISK
FACTORS
In addition to the other information included and
incorporated by reference into this joint proxy
statement/prospectus, including the matters addressed in
Cautionary Statement Regarding Forward-Looking
Statements, you should carefully consider the following
risks before deciding how to vote. In addition, you should read
and consider the risks associated with each of the businesses of
AMB and ProLogis because these risks will also affect the
combined company. These risks can be found in the respective
Annual Reports on
Form 10-K
for the year ended December 31, 2010 of AMB and ProLogis,
each of which is filed with the SEC and incorporated by
reference into this joint proxy statement/prospectus. You should
also read and consider the other information in this joint proxy
statement/prospectus and the other documents incorporated by
reference into this joint proxy statement/prospectus. See
Where You Can Find More Information.
Risk
Factors Relating to the Merger
The
exchange ratio is fixed and will not be adjusted in the event of
any change in the stock prices of either AMB or
ProLogis.
Upon the closing of the Merger, each ProLogis common share will
be converted into the right to receive 0.4464 of a newly issued
share of AMB common stock, with cash paid in lieu of fractional
shares. The exchange ratio was fixed in the merger agreement,
and while it will be adjusted in the event of a
recapitalization, merger, subdivision, issuer tender or exchange
offer or other similar transaction involving AMB or ProLogis,
the exchange ratio will not be adjusted for changes in the
market price of either AMB common stock or ProLogis common
shares. Changes in the price of AMB common stock prior to the
Merger will affect the market value of the merger consideration
that ProLogis shareholders will receive on the closing date of
the Merger. Stock price changes may result from a variety of
factors (many of which are beyond our control), including the
following factors:
|
|
|
|
|
changes in our respective businesses, operations, assets,
liabilities and prospects;
|
|
|
|
changes in market assessments of the business, operations,
financial position and prospects of either company;
|
|
|
|
market assessments of the likelihood that the Merger will be
completed, including related considerations regarding regulatory
approvals of the Merger;
|
|
|
|
interest rates, general market and economic conditions and other
factors generally affecting the price of AMB common stock and
ProLogis common shares; and
|
|
|
|
federal, state and local legislation, governmental regulation
and legal developments in the businesses in which ProLogis and
AMB operate.
|
The price of AMB common stock at the closing of the Merger may
vary from its price on the date the merger agreement was
executed, on the date of this joint proxy statement/prospectus
and on the date of the special meetings of AMB and ProLogis. As
a result, the market value of the merger consideration
represented by the exchange ratio will also vary. For example,
based on the range of trading prices of AMB common stock during
the period after January 26, 2011, the last trading day
before ProLogis common share and AMB common stock prices may
have been affected by market speculation regarding a potential
transaction involving the companies, through April 26,
2011, the latest practicable date before the date of this joint
proxy statement/prospectus, the exchange ratio of 0.4464
represented a market value ranging from a low of $14.60 to a
high of $16.42.
Because the Merger will be completed after the date of the
special meetings, at the time of your special meeting, you will
not know the exact market value of the AMB common stock that
ProLogis shareholders will receive upon completion of the
Merger. You should consider the following two risks:
|
|
|
|
|
If the price of AMB common stock increases between the date the
merger agreement was signed or the date of the AMB special
meeting and the closing of the Merger, ProLogis shareholders
will receive shares of AMB common stock that have a market value
upon completion of the Merger that is greater than the market
value of such shares calculated pursuant to the exchange ratio
on the date the merger agreement was signed or on the date of
the AMB special meeting, respectively.
|
23
|
|
|
|
|
If the price of AMB common stock declines between the date the
merger agreement was signed or the date of the ProLogis special
meeting and the closing of the Merger, including for any of the
reasons described above, ProLogis shareholders will receive
shares of AMB common stock that have a market value upon
completion of the Merger that is less than the market value of
such shares calculated pursuant to the exchange ratio on the
date the merger agreement was signed or on the date of the
ProLogis special meeting, respectively.
|
Therefore, while the number of shares of AMB common stock to be
issued per ProLogis common share is fixed, ProLogis shareholders
cannot be sure of the market value of the consideration they
will receive upon completion of the Merger.
Failure
to complete the Merger could negatively affect the stock prices
and the future business and financial results of AMB and
ProLogis.
If the Merger is not completed, the ongoing businesses of AMB or
ProLogis may be adversely affected and AMB and ProLogis will be
subject to numerous risks, including the following:
|
|
|
|
|
AMB being required, under certain circumstances, to pay ProLogis
a termination fee of $210 million and reimburse ProLogis
for up to $20 million of its expenses in connection with
the Merger;
|
|
|
|
ProLogis being required, under certain circumstances, to pay AMB
a termination fee of $315 million and reimburse AMB for up
to $20 million of its expenses in connection with the
Merger;
|
|
|
|
each of AMB and ProLogis having to pay certain costs relating to
the proposed Merger, such as legal, accounting, financial
advisor, filing, printing and mailing fees; and
|
|
|
|
the management of each of AMB and ProLogis focusing on the
Merger instead of on pursuing other opportunities that could be
beneficial to the companies, in each case, without realizing any
of the benefits of having the Merger completed.
|
If the Merger is not completed, AMB and ProLogis cannot assure
their shareholders that these risks will not materialize and
will not materially affect the business, financial results and
stock prices of AMB or ProLogis.
The
merger agreement contains provisions that could discourage a
potential acquirer of either AMB or ProLogis or could result in
any acquisition proposal being at a lower price than it might
otherwise be.
The merger agreement contains provisions that, subject to
limited exceptions, restrict the ability of each of AMB and
ProLogis to solicit, encourage, facilitate or discuss
third-party proposals to acquire all or a significant part of
AMB or ProLogis. Further, even if the AMB board of directors or
ProLogis board of trustees withdraws or modifies its
recommendation of the Topco merger or the Merger, respectively,
they will still be required to submit the matter to a vote of
their respective stockholders or shareholders at the special
meetings. In addition, either AMB or ProLogis generally has an
opportunity to offer to modify the terms of the proposed merger
agreement in response to any acquisition proposal that may be
made to the other party before the board of directors or board
of trustees, as the case may be, may withdraw or modify its
recommendation in response to such acquisition proposal. In some
circumstances, on termination of the merger agreement, one of
the parties may be required to pay a substantial termination fee
to the other party. See The Merger Termination
of the Merger Agreement.
These provisions could discourage a potential acquirer that
might have an interest in acquiring all or a significant part of
AMB or ProLogis from considering or proposing such an
acquisition, even if it were prepared to pay consideration with
a higher per share cash or market value than that market value
proposed to be received or realized in the Merger, or might
result in a potential acquirer proposing to pay a lower price
than it might otherwise have proposed to pay because of the
added expense of the termination fee that may become payable in
certain circumstances under the merger agreement.
The
pendency of the Merger could adversely affect the business and
operations of AMB and ProLogis.
In connection with the pending Merger, some customers or vendors
of each of AMB and ProLogis may delay or defer decisions, which
could negatively affect the revenues, earnings, cash flows and
expenses of AMB and ProLogis, regardless of whether the Merger
is completed. Similarly, current and prospective employees of
AMB
24
and ProLogis may experience uncertainty about their future roles
with the combined company following the Merger, which may
materially adversely affect the ability of each of AMB and
ProLogis to attract and retain key personnel during the pendency
of the Merger. In addition, due to operating covenants in the
merger agreement, each of AMB and ProLogis may be unable, during
the pendency of the Merger, to pursue strategic transactions,
undertake significant capital projects, undertake certain
significant financing transactions and otherwise pursue other
actions, even if such actions would prove beneficial.
Some
of the directors and executive officers of AMB and trustees and
executive officers of ProLogis have interests in seeing the
Merger completed that are different from, or in addition to,
those of the other AMB stockholders and ProLogis
shareholders.
Some of the directors and executive officers of AMB and trustees
and executive officers of ProLogis have arrangements that
provide them with interests in the Merger that are different
from, or in addition to, those of the stockholders of AMB or the
shareholders of ProLogis. These interests include, among other
things, the continued service as a director or an executive
officer of the combined company and, in the case of AMB
directors and executive officers, the opportunity to participate
in the new non-qualified deferred compensation plan (which we
refer to as the new NQDC plan) which is conditioned
on the consummation of the Topco merger. These interests, among
other things, may influence or may have influenced the directors
and executive officers of AMB and trustees and executive
officers of ProLogis to support or approve the Topco merger or
Merger, respectively.
Risk
Factors Relating to the Combined Company
Operational
Risks
The
combined company expects to incur substantial expenses related
to the Merger.
The combined company expects to incur substantial expenses in
connection with completing the Merger and integrating the
business, operations, networks, systems, technologies, policies
and procedures of the two companies. There are a large number of
systems that must be integrated, including billing, management
information, purchasing, accounting and finance, sales, payroll
and benefits, fixed asset, lease administration and regulatory
compliance. Although AMB and ProLogis have assumed that a
certain level of transaction and integration expenses would be
incurred, there are a number of factors beyond their control
that could affect the total amount or the timing of their
integration expenses. Many of the expenses that will be
incurred, by their nature, are difficult to estimate accurately
at the present time. Due to these factors, the transaction and
integration expenses associated with the Merger could,
particularly in the near term, exceed the savings that the
combined company expects to achieve from the elimination of
duplicative expenses and the realization of economies of scale
and cost savings related to the integration of the businesses
following the completion of the Merger. As a result of these
expenses, both AMB and ProLogis expect to take charges against
their earnings before and after the completion of the Merger.
The charges taken in connection with the Merger are expected to
be significant, although the aggregate amount and timing of such
charges are uncertain at present.
Following
the Merger, the combined company may be unable to integrate the
businesses of AMB and ProLogis successfully and realize the
anticipated synergies and related benefits of the Merger or do
so within the anticipated timeframe.
The Merger involves the combination of two companies that
currently operate as independent public companies. AMB and
ProLogis expect that the transaction will generate $80 million
of annual gross savings in general and administrative expenses,
based on preliminary estimates of certain personnel and
non-personnel reductions. The personnel cost reductions are
estimated to be approximately $65 million and relate to
anticipated reductions of certain positions at both AMB and
ProLogis that are believed to be redundant for the combined
company. The non-personnel cost reductions are estimated to be
approximately $15 million and relate to duplicative corporate
infrastructure and public company operating expenses. AMB and
ProLogis expect to realize these savings on an annualized
run-rate basis by December 31, 2012.
25
However, the combined company will be required to devote
significant management attention and resources to integrating
the business practices and operations of AMB and ProLogis.
Potential difficulties the combined company may encounter in the
integration process include the following:
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the inability to successfully combine the businesses of AMB and
ProLogis in a manner that permits the combined company to
achieve the cost savings anticipated to result from the Merger,
which would result in the anticipated benefits of the Merger not
being realized in the timeframe currently anticipated or at all;
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lost sales and customers as a result of certain customers of
either of the two companies deciding not to do business with the
combined company;
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the complexities associated with managing the combined
businesses out of several different locations and integrating
personnel from the two companies;
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the additional complexities of combining two companies with
different histories, cultures, regulatory restrictions, markets
and customer bases;
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the failure to retain key employees of either of the two
companies;
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potential unknown liabilities and unforeseen increased expenses,
delays or regulatory conditions associated with the
Merger; and
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performance shortfalls at one or both of the two companies as a
result of the diversion of managements attention caused by
completing the Merger and integrating the companies
operations.
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For all these reasons, you should be aware that it is possible
that the integration process could result in the distraction of
the combined companys management, the disruption of the
combined companys ongoing business or inconsistencies in
the combined companys products, services, standards,
controls, procedures and policies, any of which could adversely
affect the ability of the combined company to maintain
relationships with customers, vendors and employees or to
achieve the anticipated benefits of the Merger, or could
otherwise adversely affect the business and financial results of
the combined company.
Following
the Merger, the combined company may be unable to retain key
employees.
The success of the combined company after the Merger will depend
in part upon its ability to retain key AMB and ProLogis
employees. Key employees may depart either before or after the
Merger because of issues relating to the uncertainty and
difficulty of integration or a desire not to remain with the
combined company following the Merger. Accordingly, no assurance
can be given that AMB, ProLogis or, following the Merger, the
combined company will be able to retain key employees to the
same extent as in the past.
The
Merger will result in changes to the board of directors and
management of the combined company that may affect the strategy
of the combined company as compared to that of AMB and
ProLogis.
If the parties complete the Merger, the composition of the board
of directors of the combined company and management team will
change from the boards and management teams of AMB and ProLogis.
The board of directors of the combined company will consist of
11 members, with five directors selected by the current board of
directors of AMB and six directors selected by the current board
of trustees of ProLogis. The combined company will also have
executive officers from both AMB and ProLogis. This new
composition of the board of directors and the management team of
the combined company may affect the business strategy and
operating decisions of the combined company upon the completion
of the Merger.
The
future results of the combined company will suffer if the
combined company does not effectively manage its expanded
operations following the Merger.
Following the Merger, the combined company may continue to
expand its operations through additional acquisitions and other
strategic transactions, some of which involve complex
challenges. The future success of the combined company will
depend, in part, upon the ability of the combined company to
manage its expansion opportunities, which pose substantial
challenges for the combined company to integrate new operations
into its
26
existing business in an efficient and timely manner, and upon
its ability to successfully monitor its operations, costs,
regulatory compliance and service quality, and to maintain other
necessary internal controls. The combined company cannot assure
you that its expansion or acquisition opportunities will be
successful, or that the combined company will realize its
expected operating efficiencies, cost savings, revenue
enhancements, synergies or other benefits.
The
trading price of shares of the common stock of the combined
company may be affected by factors different from those
affecting the price of shares of AMB common stock or ProLogis
common shares before the Merger.
If the Merger is completed, ProLogis shareholders will become
holders of approximately 60%, and AMB stockholders will hold
approximately 40%, of the outstanding shares of common stock of
the combined company. The results of operations of the combined
company, as well as the trading price of the common stock of the
combined company, after the Merger may be affected by factors
different from those currently affecting AMBs or
ProLogis results of operations and the trading prices of
AMB common stock and ProLogis common shares. These factors
include:
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a greater number of shares of the combined company outstanding
as compared to the number of currently outstanding shares of AMB;
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different stockholders;
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different businesses; and
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different assets and capitalizations.
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Accordingly, the historical trading prices and financial results
of AMB and ProLogis may not be indicative of these matters for
the combined company after the Merger. For a discussion of the
business of AMB and ProLogis and of certain factors to consider
in connection with that business, see the documents incorporated
by reference by AMB or ProLogis into this joint proxy
statement/prospectus referred to under Where You Can Find
More Information.
Regulatory
and Legal Risks
Counterparties
to certain significant agreements with AMB or ProLogis may
exercise contractual rights under such agreements in connection
with the Merger.
AMB and ProLogis are each party to certain agreements that give
the counterparty certain rights following a change in
control, including in some cases the right to terminate
the agreement. Under some such agreements, the Merger will
constitute a change in control and therefore the counterparty
may exercise certain rights under the agreement upon the closing
of the Merger. Certain AMB and ProLogis funds, joint ventures,
management and servicing contracts, leases and debt obligations
have agreements subject to such provisions. Any such
counterparty may request modifications of their respective
agreements as a condition to granting a waiver or consent under
their agreement. There is no assurance that such counterparties
will not exercise their rights under the agreements, including
termination rights where available, that the exercise of any
such rights will not result in a material adverse effect or that
any modifications of such agreements will not result in a
material adverse effect.
In
connection with the announcement of the merger agreement,
several lawsuits have been filed and are pending, seeking, among
other things, to enjoin the Merger and rescind the merger
agreement, and an adverse judgment in any of the lawsuits may
prevent the Merger from being effective or from becoming
effective within the expected timeframe.
ProLogis, the members of the ProLogis board of trustees, New
Pumpkin, Upper Pumpkin, Pumpkin LLC, AMB and AMP LP, have each
been named as defendants in several lawsuits brought by holders
of ProLogis common shares challenging the Merger, and seeking,
among other things, to enjoin the Merger, direct the defendants
to exercise their fiduciary duties, rescind the merger
agreement, and award the plaintiffs damages and expenses. If the
plaintiffs are successful in obtaining an injunction prohibiting
the parties from completing the Merger on the agreed upon terms,
the injunction may prevent the completion of the Merger in the
expected timeframe (if at all). For more information about
litigation related to the Merger, including the agreements in
principle with respect to the proposed settlement of the
litigation, see The Merger Litigation Relating
to the Merger.
27
REIT
Risks
The
combined company would succeed to, and may incur, adverse tax
consequences if AMB or ProLogis has failed or fails to qualify
as a REIT for U.S. federal income tax purposes.
If either AMB or ProLogis has failed or fails to qualify as a
REIT for U.S. federal income tax purposes and the Merger is
completed, the combined company generally would succeed to and
may incur significant tax liabilities, and the combined company
could possibly lose its REIT status should disqualifying
activities continue after the Merger.
REITs
are subject to a range of complex organizational and operational
requirements.
As REITs, each of AMB and ProLogis must distribute with respect
to each year at least 90% of its REIT taxable income to its
stockholders or shareholders, as applicable. Other restrictions
apply to a REITs income and assets. For any taxable year
that AMB or ProLogis fails to qualify as a REIT, it will not be
allowed a deduction for dividends paid to its stockholders or
shareholders, as applicable, in computing taxable income and
thus would become subject to U.S. federal and state income
tax as if it were a regular taxable corporation. In such an
event, AMB or ProLogis, as the case may be, could be subject to
potentially significant tax liabilities. Unless entitled to
relief under certain statutory provisions, AMB or ProLogis, as
the case may be, would also be disqualified from treatment as a
REIT for the four taxable years following the year in which it
lost its qualification. If AMB or ProLogis failed to qualify as
a REIT, the market price of the common stock of the combined
company may decline and the combined company may need to reduce
substantially the amount of distributions to its stockholders
because of its increased tax liability.
Other
Risks
In
connection with the Merger, the combined company is planning to
refinance a significant amount of indebtedness, and cannot
guarantee that it will be able to obtain the necessary funds on
favorable terms or at all.
The closing of the Merger may trigger termination of each of
AMBs and ProLogis respective credit agreements and
the mandatory prepayment of the amounts outstanding thereunder,
and the mandatory prepayment of certain secured mortgage debt of
AMB, ProLogis or their affiliates. AMB and ProLogis are engaged
in discussions with certain potential financing providers
regarding one or more bank credit facilities to be entered into
by the combined company at the time of the closing of the
Merger, funds from which would be used in part to make such
mandatory prepayments and to provide a source of liquidity for
the combined company. However, the combined companys
ability to obtain such financing will depend on, among other
factors, prevailing market conditions at the time of the closing
of the Merger and other factors beyond the control of the
combined company. AMB and ProLogis cannot assure you that the
combined company will be able to obtain additional financing on
terms acceptable to the combined company or at all. Completion
of the Merger is not conditioned on completing such financing
transactions.
If the combined company is unable to obtain such financing, or
is unable to do so on terms acceptable to the combined company,
the combined company or, prior to the closing of the Merger, AMB
and ProLogis, may seek to obtain waivers or amendments of the
mandatory prepayment provisions under the terms of AMB and
ProLogis respective bank credit facilities. ProLogis
sought and obtained a waiver of the termination and mandatory
prepayment provisions of its bank credit facility with respect
to the effect of the signing of the merger agreement, but such
waiver does not extend to the termination and prepayment
provisions which would be triggered by the closing of the
Merger. In addition, AMB and ProLogis have sought certain
consents related to mandatory prepayments of secured mortgage
debt of the parties which may be triggered by the closing of the
Merger. As of the date hereof, substantially all of the consents
related to such mortgage debt requested by AMB have been
received. ProLogis has delivered its requests for consents and
waivers required under such mortgage debt, which has an
aggregate principal amount of approximately $407 million
(and could require the payment of associated prepayment
penalties of approximately $45 million), and is awaiting
responses to such requests. AMB and ProLogis cannot assure you
that any further consents or waivers will be obtained if sought,
or that the combined company will have sufficient funds
available to make such mandatory prepayments if necessary.
28
The
combined company will have a substantial amount of indebtedness
and may need to incur more in the future.
The combined company will have substantial indebtedness. For
example, as of December 31, 2010, the combined company
would have had an estimated fixed charge coverage ratio of 2.5x
and an estimated debt as a percentage of total market
capitalization of 41.3% (by comparison, as of that date, the
standalone figures for AMB were 2.6x and 37.2%, respectively,
and for ProLogis were 2.3x and 42.9%, respectively). In
addition, in connection with executing the combined
companys business strategies following the Merger, the
combined company expects to continue to evaluate the possibility
of acquiring additional properties and making strategic
investments, and the combined company may elect to finance these
endeavors by incurring additional indebtedness. Its substantial
indebtedness could have material adverse consequences for the
combined company, including (i) reducing the combined
companys credit ratings and thereby raising its borrowing
costs, (ii) hindering the combined companys ability
to adjust to changing market, industry or economic conditions,
(iii) limiting the combined companys ability to
access the capital markets to refinance maturing debt or to fund
acquisitions or emerging businesses, (iv) limiting the
amount of free cash flow available for future operations,
acquisitions, dividends, stock repurchases or other uses,
(v) making the combined company more vulnerable to economic
or industry downturns, including interest rate increases and
(vi) placing the combined company at a competitive
disadvantage compared to less leveraged competitors.
Moreover, to respond to competitive challenges, the combined
company may be required to raise substantial additional capital
to execute its business strategy. The combined companys
ability to arrange additional financing will depend on, among
other factors, the combined companys financial position
and performance, as well as prevailing market conditions and
other factors beyond the combined companys control. If the
combined company is able to obtain additional financing, the
combined companys credit ratings could be further
adversely affected, which could further raise the combined
companys borrowing costs and further limit its future
access to capital and its ability to satisfy its obligations
under its indebtedness.
The
historical and unaudited pro forma combined condensed financial
information included elsewhere in this joint proxy
statement/prospectus may not be representative of the combined
companys results after the Merger, and accordingly, you
have limited financial information on which to evaluate the
combined company.
The unaudited pro forma combined condensed financial information
included elsewhere in this joint proxy statement/prospectus has
been presented for informational purposes only and is not
necessarily indicative of the financial position or results of
operations that actually would have occurred had the Merger been
completed as of the date indicated, nor is it indicative of the
future operating results or financial position of the combined
company. The unaudited pro forma combined condensed financial
information reflects adjustments, which are based upon
preliminary estimates, to allocate the purchase price to
AMBs assets and liabilities. The purchase price allocation
reflected in the unaudited pro forma combined condensed
financial information included elsewhere in this joint proxy
statement/prospectus is preliminary, and the final allocation of
the purchase price will be based upon the actual purchase price
and the fair value of the assets and liabilities of AMB as of
the date of the completion of the Merger. The unaudited pro
forma combined condensed financial information does not reflect
future events that may occur after the Merger, including the
costs related to the planned integration of the two companies
and any future nonrecurring charges resulting from the Merger,
and does not consider potential impacts of current market
conditions on revenues or expense efficiencies. The unaudited
pro forma combined condensed financial information presented
elsewhere in this joint proxy statement/prospectus is based in
part on certain assumptions regarding the Merger that AMB and
ProLogis believe are reasonable under the circumstances. AMB and
ProLogis cannot assure you that the assumptions will prove to be
accurate over time.
AMB
and ProLogis face other risks.
The risks listed above are not exhaustive, and you should be
aware that, following the Merger, the combined company will face
various other risks, including those discussed in reports filed
by AMB and ProLogis with the SEC. See Where You Can Find
More Information.
29
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus and the documents
incorporated by reference into this joint proxy
statement/prospectus contain forward-looking statements within
the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act. These forward-looking
statements, which are based on current expectations, estimates
and projections about the industry and markets in which AMB and
ProLogis operate and beliefs of and assumptions made by AMB
management and ProLogis management , involve uncertainties that
could significantly affect the financial results of AMB or
ProLogis or the combined company. Words such as
expects, anticipates,
intends, plans, believes,
seeks, estimates, variations of such
words and similar expressions are intended to identify such
forward-looking statements, which generally are not historical
in nature. Such forward-looking statements include, but are not
limited to, statements about the benefits of the business
combination transaction involving AMB and ProLogis, including
future financial and operating results, the combined
companys plans, objectives, expectations and intentions.
All statements that address operating performance, events or
developments that we expect or anticipate will occur in the
future including statements relating to rent and
occupancy growth, development activity and changes in sales or
contribution volume of developed properties, general conditions
in the geographic areas where we operate and the availability of
capital in existing or new property funds are
forward-looking statements. These statements are not guarantees
of future performance and involve certain risks, uncertainties
and assumptions that are difficult to predict. Although we
believe the expectations reflected in any forward-looking
statements are based on reasonable assumptions, we can give no
assurance that our expectations will be attained and therefore,
actual outcomes and results may differ materially from what is
expressed or forecasted in such forward-looking statements. Some
of the factors that may affect outcomes and results include, but
are not limited to, those set forth under Risk
Factors as well as the following:
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national, international, regional and local economic climates,
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changes in financial markets, interest rates and foreign
currency exchange rates,
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increased or unanticipated competition for our properties,
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risks associated with acquisitions,
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maintenance of REIT status,
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availability of financing and capital,
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changes in demand for developed properties,
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risks associated with achieving expected revenue synergies or
cost savings,
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risks associated with the ability to consummate the merger and
the timing of the closing of the merger, and
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those additional risks and factors discussed in reports filed
with the Securities and Exchange Commission (which we refer to
as the SEC) by AMB and ProLogis from time to time,
including those discussed under the heading Risk
Factors in their respective most recently filed reports on
Forms 10-K
and 10-Q.
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Neither AMB nor ProLogis undertakes any duty to update any
forward-looking statements appearing in this document, except as
may be required by applicable securities laws.
30
INFORMATION
ABOUT THE COMPANIES
AMB
Property Corporation
Pier 1, Bay 1
San Francisco, California 94111
(415) 394-9000
AMB, together with its subsidiaries, is a global owner, operator
and developer of industrial real estate, focused on major hub
and gateway distribution markets in the Americas, Europe and
Asia. As of December 31, 2010, AMB owned, or had
investments in, on a consolidated basis or through
unconsolidated joint ventures, properties and development
projects expected to total approximately 159.6 million
square feet (14.8 million square meters) in 49 markets
within 15 countries.
The business of AMB is operated primarily through its operating
partnership, AMB LP. As of December 31, 2010, AMB owned an
approximate 98.2% general partnership interest in the operating
partnership, excluding preferred units. As the sole general
partner of AMB LP, AMB has the full, exclusive and complete
responsibility for and discretion in its
day-to-day
management and control. AMB LP holds substantially all of the
assets of AMB and directly or indirectly holds the ownership
interests in AMBs joint ventures.
AMB, a Maryland corporation, is a self-administered and
self-managed REIT, and it expects that it has qualified, and
will continue to qualify, as a REIT for U.S. federal income
tax purposes beginning with the year ended December 31,
1997. As a self-administered and self-managed REIT, the
employees of AMB perform its corporate, administrative and
management functions, rather than the company relying on an
outside manager for these services. AMB believes that real
estate is fundamentally a local business and is best operated by
local teams in each of its markets. As a vertically integrated
company, AMB actively manages its portfolio of properties. In
select markets, AMB may, from time to time, establish
relationships with third-party real estate management firms,
brokers and developers that provide some property-level
administrative and management services under the companys
direction.
AMB was incorporated in the state of Maryland in 1997, and AMB
LP was formed in the state of Delaware in 1997. AMB common stock
is listed on the NYSE, trading under the symbol AMB.
The primary office of AMB is located in San Francisco,
California.
Additional information about AMB and its subsidiaries is
included in documents incorporated by reference into this joint
proxy statement/prospectus. See Where You Can Find More
Information.
ProLogis
4545 Airport Way
Denver, Colorado 80239
(303) 567-5000
ProLogis is a leading global provider of industrial distribution
facilities. ProLogis is organized as a Maryland real estate
investment trust and has elected to be taxed as a REIT under the
Code. The world headquarters of ProLogis are located in Denver,
Colorado. The European headquarters of ProLogis are located in
the Grand Duchy of Luxembourg with its European customer service
headquarters located in Amsterdam, the Netherlands. The primary
office of ProLogis in Asia is located in Tokyo, Japan.
ProLogis was formed in 1991, primarily as a long-term owner of
industrial distribution space operating in the United States.
Over time, the business strategy of ProLogis evolved to include
the development of properties for contribution to property funds
in which ProLogis maintains an ownership interest and the
management of those property funds and the properties they own.
Originally, ProLogis sought to differentiate itself from its
competition by focusing on the distribution space requirements
of its corporate customers on a national, regional and local
basis and providing customers with consistent levels of service
throughout the United States. However, as the needs of its
customers expanded to markets outside the United States, so did
the portfolio and management team of ProLogis.
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Today, ProLogis is an international real estate company with
operations in North America, Europe and Asia. The business
strategy of ProLogis is to integrate international scope and
expertise with a strong local presence in its markets, thereby
becoming an attractive choice for its targeted customer base,
the largest global users of distribution space, while achieving
long-term sustainable growth in cash flow.
ProLogis common stock is listed on the NYSE, trading under the
symbol PLD.
New Pumpkin Inc., a Maryland corporation, Upper Pumpkin LLC, a
Delaware limited liability company, and Pumpkin LLC, a Delaware
limited liability company, are direct and indirect, wholly owned
subsidiaries of ProLogis and were formed in January 2011 for the
purpose of effecting the Merger.
Additional information about ProLogis and its subsidiaries is
included in documents incorporated by reference into this joint
proxy statement/prospectus. See Where You Can Find More
Information.
The
Combined Company
Corporate
Headquarters:
San Francisco, California
94111
(415) 394-9000
Operational
Headquarters:
Denver, Colorado 80239
(303) 567-5000
The combined company will be named ProLogis, Inc.
and will be a Maryland corporation that is a self-administered
and self-managed REIT for U.S. federal income tax purposes.
The combined company is expected to be a leading global owner,
operator and developer of industrial real estate. The combined
company is expected to have a pro forma equity market
capitalization of approximately $14 billion, a total market
capitalization in excess of $24 billion, and gross assets
owned and managed of approximately $46 billion. The
combined company will own or manage approximately
600 million square feet (approximately 55 million
square meters) of modern distribution facilities located in key
gateway markets and logistics corridors in 22 countries.
References to the combined company in this document
shall be to AMB Property Corporation after the effective time of
the Merger, which will be renamed as ProLogis, Inc.
The business of the combined company will be operated through an
operating partnership, ProLogis, L.P. On a pro forma basis
giving effect to the Merger, the combined company will own an
approximate 99.3% general partnership interest in the operating
partnership, excluding preferred units, and, as its sole general
partner, the combined company will have the full, exclusive and
complete responsibility for and discretion in the
day-to-day
management and control of the operating partnership.
The common stock of the combined company will be listed on the
NYSE, trading under the symbol PLD.
32
THE
MERGER
The following is a discussion of the Merger and the material
terms of the merger agreement between AMB and ProLogis. You are
urged to read the merger agreement carefully and in its
entirety, a copy of which is attached as Annex A to this
joint proxy statement/prospectus and incorporated by reference
herein.
Background
of the Merger
The boards and management teams of AMB and ProLogis have
periodically and in the ordinary course evaluated and considered
a variety of financial and strategic opportunities as a part of
their respective long-term strategies to maximize shareholder
value. In 2001 and 2005, members of the management teams of AMB
and ProLogis engaged in preliminary discussions regarding a
potential strategic business combination between the two
companies, but these prior discussions never resulted in any
agreement regarding a potential combination and the discussions
were terminated.
Throughout 2009 and early 2010, AMB management discussed with
the AMB board of directors a variety of potential strategic
growth opportunities that they believed might be available at
attractive prices, in part due to the continuing effects of the
financial crisis and resulting market disruptions. In addition,
AMB management discussed with the AMB board of directors a
possible merger with ProLogis. During 2010, ProLogis management
had several strategic discussions with the ProLogis board of
trustees regarding the future growth in its fund management
business and international expansion, including the possible
reentry into China and expansion into Brazil. In addition,
ProLogis management discussed with the ProLogis board of
trustees the need to continue to strengthen ProLogis
balance sheet in the months and years ahead.
In May 2010, a large private equity firm, which we refer to as
Company A, approached ProLogis management regarding
a potential transaction involving ProLogis. The parties engaged
in various discussions involving the net asset value and future
growth potential of ProLogis and ProLogis management kept the
board of trustees apprised of the status of such discussions.
Despite such discussions, the parties did not discuss any
specific terms of a possible transaction nor did Company A make
any proposal regarding a possible transaction involving ProLogis.
In September 2010, Company A again approached ProLogis
management and expressed interest in a transaction involving a
potential acquisition of ProLogis. Management informed the
ProLogis board of trustees as to such expression of interest
and, in light of previous discussions with Company A, ProLogis
management stated that if Company A put forth a specific
proposal regarding an acquisition or other transaction, ProLogis
could evaluate whether to enter into a confidentiality agreement
and provide further information on ProLogis to Company A. In
mid-October 2010, after numerous
follow-up
conversations between members of management of ProLogis and
Company A, Company A informed ProLogis that it did not believe
that it could provide an acquisition proposal that it would
expect to be acceptable to ProLogis based upon, among other
things, the increase in the trading price of ProLogis common
shares, ProLogis significant land holdings and limitations
on Company As ability to place substantial additional debt
on ProLogis as a result of covenants under ProLogis
indenture.
In September 2010, Mr. Eugene F. Reilly, President, The
Americas for AMB, and Mr. Ted R. Antenucci, President and
Chief Investment Officer of ProLogis, had discussions regarding
how Mr. Hamid R. Moghadam, Chairman and Chief Executive
Officer of AMB, could approach Mr. Walter C. Rakowich,
Chief Executive Officer of ProLogis, to initiate a discussion
regarding a possible merger.
Following a meeting of the AMB board of directors in September
2010, Mr. Moghadam initiated an informal discussion with
Mr. William E. Sullivan, Chief Financial Officer of
ProLogis, at an event organized by Morgan Stanley to discuss
whether ProLogis management would be receptive to engage in
discussions regarding a possible business combination between
AMB and ProLogis. Mr. Sullivan informed Mr. Moghadam
that ProLogis was currently occupied with pursuing certain
transactions which he could not discuss, and that ProLogis
management may have greater availability to engage in such
discussions following the completion of such transactions. At
that time, ProLogis was nearing an announcement of a sale of a
portfolio of industrial assets and in substantive discussions
with a potential buyer of a portfolio of non-core retail and
mixed-use assets.
33
In early November 2010, Mr. Moghadam called
Mr. Rakowich to determine whether they could meet to
discuss a potential business combination between the two
companies. Mr. Rakowich agreed to meet with
Mr. Moghadam and, prior to the meeting, informed the
ProLogis board of trustees of such meeting.
Messrs. Moghadam and Rakowich met on November 6, 2010
following a conference hosted by J.P. Morgan in Napa
Valley, California that they both attended. During this meeting,
Messrs. Moghadam and Rakowich had informal discussions
about their respective companies, their preliminary views of the
rationale for a strategic business combination of AMB and
ProLogis, and governance and operational issues that would need
to be addressed in connection with such a combination, including
issues relating to selecting the management team of the combined
company, related succession planning issues, the name of the
combined company, and the location of the headquarters of the
combined company.
On November 10, 2010, Mr. Rakowich convened a
telephonic meeting of the board of trustees of ProLogis at which
he informed the board of trustees of his discussions with
Mr. Moghadam. The ProLogis board discussed some of the
issues that would need to be addressed in a possible business
combination and determined that it should engage Morgan Stanley
to act as its financial advisor and to prepare financial
analyses for its upcoming board meeting in December.
During the remainder of November 2010, Messrs. Moghadam and
Rakowich had further informal discussions by phone regarding a
potential strategic business combination of the two companies.
During these discussions, Messrs. Moghadam and Rakowich
acknowledged that governance and operational issues, including
the selection of the management team of the combined company and
the determination of where the headquarters of the combined
company would be located, would need to be resolved in a manner
satisfactory to both parties in order to enable continuity of
management and an effective and timely integration of the two
companies operations and to otherwise achieve the
financial and strategic benefits of a business combination.
During this period Mr. Moghadam updated Jeffrey
L. Skelton, the lead outside director of AMB, on the status
of his discussions with ProLogis, and Mr. Skelton in turn
updated other members of the AMB board of directors.
On November 29, 2010, the ProLogis board of trustees held a
telephonic meeting at which Mr. Rakowich summarized the
status of the current discussions with AMB. Representatives of
Mayer Brown LLP and Greenberg Traurig, LLP, legal counsel to
ProLogis, also participated in this meeting and discussed with
the ProLogis board their duties as trustees in considering a
potential business combination transaction.
On December 6 and 7, 2010, the ProLogis board held a regularly
scheduled board meeting at which Mr. Rakowich again
discussed the potential combination of ProLogis and AMB. A
representative of Morgan Stanley attended part of this meeting
and provided a preliminary financial overview of such a
potential business combination. The ProLogis board of trustees
discussed the financial and strategic benefits of a potential
transaction, as well as several issues that would need to be
addressed to the satisfaction of the board, including governance
of the combined company, operational structuring, achievement of
synergies and integration. The ProLogis board authorized
Mr. Rakowich to continue preliminary discussions regarding
a potential business combination with a view toward whether the
issues discussed at the meeting could be resolved and requested
that Mr. Rakowich continue to keep the ProLogis board of
trustees apprised of any such discussions.
On December 9, 2010, Mr. Moghadam updated the AMB
board of directors about his discussions with Mr. Rakowich.
The AMB board of directors expressed its support of senior
management in continuing to engage in preliminary discussions
with members of ProLogis management regarding such potential
strategic combination. Later that day, Mr. Rakowich called
Mr. Moghadam to continue their discussion of a potential
business combination.
On December 10, 2010, Mr. Moghadam met Mr. Irving
F. Lyons, a member of the ProLogis board of trustees, for a
previously scheduled breakfast in San Francisco. During the
breakfast and afterward during a visit to AMBs offices,
Messrs. Moghadam and Lyons discussed the strategic business
rationale for the proposed combination of AMB and ProLogis.
On December 11 and 12, 2010, Messrs. Rakowich and Lyons and
Messrs. Moghadam and Lyons had a series of conversations
regarding potential alternatives to address the issues of a
combined companys governance and operational structure,
including the composition of the initial management team,
management succession planning, the composition of the board of
directors, the location of the headquarters of the combined
company and the name of
34
the combined company. On December 13, 2010,
Mr. Rakowich had a further conversation with
Mr. Moghadam focusing on these issues.
On December 15, 2010, the ProLogis board of trustees met
telephonically and Messrs. Rakowich and Lyons reported
on their recent discussions with Mr. Moghadam.
Mr. Rakowich recommended to the ProLogis board that he and
Mr. Lyons have an in-person meeting with Mr. Moghadam
to determine whether and on what terms the governance and
operational issues could be resolved. The ProLogis board of
trustees expressed its support for these discussions.
On December 16, 2010, Messrs. Rakowich and Lyons met
with Mr. Moghadam in San Francisco to continue to
discuss the terms of a potential business combination, including
the governance arrangements and the operational structure of the
combined company.
From December 17 to December 20, 2010,
Messrs. Rakowich and Moghadam continued to engage in
communications regarding terms for a potential business
combination. A preliminary understanding was reached in the
course of these communications that any transaction would be a
merger of equals, that the exchange ratio would be
determined on an
at-the-market
basis (i.e., based on the relative market prices of shares of
AMB and ProLogis, although Messrs. Rakowich and Moghadam did not
discuss any specific figures for the exchange ratio at that
time), that the board of the combined company would consist of a
majority of persons nominated by ProLogis, that
Messrs. Moghadam and Rakowich would share the position of
chief executive officer of the combined company with
Mr. Rakowich stepping down from such role at some future
date, that the corporate headquarters would be located in
San Francisco and the operational headquarters would be
located in Denver and that the combined company would operate
under the ProLogis name. Messrs. Moghadam and Rakowich
acknowledged that any preliminary understanding between them
would be subject to the approval of the boards of AMB and
ProLogis following further due diligence and an exploration of
the remaining terms of a strategic business combination
transaction.
On December 22, 2010, the AMB board of directors had a
telephonic meeting with members of senior management,
representatives of J.P. Morgan, who had been invited the
previous day to participate in the meeting as AMBs
financial advisor in connection with a potential transaction,
and representatives of Wachtell, Lipton, Rosen & Katz,
AMBs legal advisor in connection with a potential
transaction. Mr. Moghadam reported to the AMB board of
directors on the progress of discussions with ProLogis about a
potential strategic business combination, including his
preliminary understanding with Mr. Rakowich on the form of
transaction, governance arrangements and name of the combined
company. The AMB board of directors then discussed with
Mr. Moghadam and AMBs advisors open issues with
respect to the transaction. J.P. Morgan and Wachtell Lipton
discussed with the AMB board that the potential business
combination was proposed to be structured as a merger of
equals and engaged in discussion with the AMB board on the
features of a merger of equals transaction.
Following discussion by the AMB board with senior management and
AMBs advisors, the AMB board expressed its support for
management and AMBs advisors to continue to explore a
strategic business combination transaction, and, in the event
further progress was made in the negotiations, engaging with
ProLogis in a mutual due diligence review process.
On December 22, 2010, the ProLogis board of trustees had a
telephonic meeting with members of the senior management of
ProLogis and representatives of Greenberg Traurig, LLP and Mayer
Brown LLP. Mr. Rakowich summarized the discussions with
Mr. Moghadam regarding a potential business combination of
ProLogis and AMB and explained the business rationale for such a
transaction. Mr. Rakowich described the proposed structure
of the transaction as a merger of equals and
described the other aspects of the proposed transaction. The
ProLogis board of trustees discussed with Mr. Rakowich the
business rationale for such a transaction and the potential
impact of such a transaction on ProLogis. Mr. Rakowich
further discussed with the ProLogis board of trustees open
issues with respect to the transaction. Following such
discussion, the ProLogis board of trustees confirmed its support
for management to continue discussions with AMB regarding a
merger of equals and, if further progress was made
in such discussions, to provide an updated financial analysis of
such a transaction for the boards consideration. In the
event that the discussions with AMB did not result in the
pursuit of a merger with AMB, the ProLogis board of trustees did
not intend for ProLogis to pursue other business combinations
and was prepared to have ProLogis continue as a stand-alone
company.
From December 28, 2010 through December 31, 2010,
Messrs. Moghadam and Rakowich had a series of conversations
to discuss the management structure of the combined company.
During this period, representatives of the two companies
discussed potential timing for negotiating and signing a merger
agreement, and continued negotiations over governance
arrangements, transaction structure and the business plan of a
combined company, and engaged in due diligence reviews of the
other partys publicly available information.
35
On December 31, 2010, AMB and ProLogis, with the assistance
of their advisors, entered into a confidentiality agreement that
included mutual standstill and confidentiality restrictions.
On January 5, 2011, Mr. Rakowich, together with
Mr. Sullivan and Mr. Edward S. Nekritz, General
Counsel of ProLogis, met with Mr. Moghadam, Mr. Thomas
S. Olinger, Chief Financial Officer of AMB, Ms. Tamra D.
Browne, General Counsel of AMB, and Ms. Nancy Hemmenway,
Senior Vice President, Human Resources of AMB, in
San Francisco to discuss the various business functions of
the combined company that would be located in Denver and
San Francisco, and to discuss the strategy and operations
of the combined company, as well as the integration of the AMB
and ProLogis businesses.
On January 6, 2011, the ProLogis board of trustees met in
San Francisco with Messrs. Sullivan, Antenucci and
Nekritz, representatives of Morgan Stanley and representatives
of Mayer Brown LLP and Greenberg Traurig, LLP in connection with
the potential transaction. Mr. Rakowich reviewed the
background of the negotiations with AMB and provided an update
of the negotiations since the December 22 meeting of the
ProLogis board of trustees. Mr. Rakowich described the
current proposal for governance and management structure and
succession and the various functions of the combined company,
with a corporate headquarters located in San Francisco and
an operational headquarters located in Denver. Representatives
of Morgan Stanley then provided an updated financial analysis to
the ProLogis board of trustees of the proposed transaction,
including potential cost savings and other financial and
operational synergies that could result from such a transaction
based on the financial projections and cost-savings estimates
provided by the management of ProLogis and AMB. The ProLogis
board of trustees discussed the combined companys cost of
capital and strategies for growth, and the impact of the
potential business combination on customers of ProLogis as well
as its employees. The board also discussed the terms and
conditions under which Mr. Rakowich might continue his role
as chief executive officer of ProLogis and, in the event that an
agreement was reached with respect to a transaction, the
combined company. After further discussion with the members of
senior management of ProLogis and the financial and legal
advisors of ProLogis, the ProLogis board of trustees authorized
ProLogis management to continue discussions with AMB regarding a
business combination transaction consistent with the terms
described to the ProLogis board of trustees.
From January 6 to January 11, 2011, the two companies, with
the assistance of their advisors, continued to negotiate
governance arrangements (including the composition of the
initial management team, management succession planning, the
composition and committee structure of the board of directors,
and the provisions of the combined companys charter and
bylaws), potential transaction structures, proposed transaction
terms, and the business plan of a combined company.
On January 9, 2011, members of AMB management, including
Messrs. Moghadam and Olinger, Mmes. Browne and Hemmenway,
members of ProLogis management, including Messrs. Rakowich,
Sullivan and Nekritz, and their respective legal and financial
advisors met in Denver, Colorado to discuss the proposed
structure of a potential business combination and to negotiate
terms of the transaction. The participants in the discussions
agreed that the business combination should be structured in a
manner that achieves the greatest operational, tax and
accounting efficiencies, regardless of which legal entities
survived as a technical matter. In particular, both parties
acknowledged the importance of the combined company operating
under an UPREIT structure and structuring the transaction in an
efficient manner to accomplish that goal. The discussions
focused on a three-step transaction in which ProLogis would be
reorganized into an UPREIT structure with a newly formed
subsidiary of ProLogis as the new holding company and ProLogis
as an indirect subsidiary of the new holding company, the
subsequent merger of the new holding company into AMB, with AMB
changing its name to ProLogis Inc., and the
subsequent contribution of ProLogis to AMBs operating
partnership.
On January 12, 2011, the AMB board of directors met with
AMB senior management and AMBs outside legal and financial
advisors. Mr. Moghadam, J.P. Morgan and Wachtell
Lipton updated the AMB board on the status of negotiations with
ProLogis. J.P. Morgan then reviewed and discussed with the
AMB board financial information regarding ProLogis, AMB and the
transaction. Wachtell Lipton and members of management then
reviewed and discussed with the AMB board the proposed terms of
a business combination.
Over the course of the next week, AMB and ProLogis and their
respective advisors continued to work to negotiate terms for a
potential business combination, including the negotiation of
transaction documentation. During this time,
Messrs. Moghadam and Rakowich came to a preliminary
understanding that Mr. Rakowich would
36
serve as co-chief executive officer and board member of the
combined company until December 31, 2012. On
January 15, 2011, each of ProLogis and AMB opened its
electronic data room to the other party, and the parties and
their advisors commenced due diligence review of the information
made available.
On January 16, 2011, Mr. Moghadam, Ms. Hemmenway,
Mr. Guy P. Jaquier, President Europe and Asia and
President, Private Capital of AMB, and Mr. Reilly, met in
Denver with Messrs. Rakowich and Nekritz, Mr. Gary E.
Anderson, Head of Global Operations and Investment Management of
ProLogis, and Mr. Michael S. Curless, Managing Director of
Global Capital Deployment of ProLogis. The parties engaged in
detailed discussions of various matters that would be important
to the strategic success of the potential transaction, including
the operational structure and roles of the proposed members of
the management team of the combined company as well as other
personnel of the combined company. Additional meetings were held
by Messrs. Sullivan and Olinger in Denver on
January 16, 2011 to engage in a detailed discussion and
negotiation of the integration of many of the corporate
functions.
On January 16, 2011, an initial draft of a merger agreement
was distributed by Wachtell Lipton to ProLogis and its legal
advisors. Over the course of the next two weeks, AMB and
ProLogis and their respective legal and financial advisors
continued to negotiate the merger agreement and other
transaction documentation and to conduct their financial and
legal due diligence reviews. The parties and their advisors also
discussed both governmental and third-party approvals and
consents that would be required in connection with a business
combination, and continued their analysis of the integration of
the two companies and the potential synergies from the
combination.
On January 20, 2011, the AMB board of directors received an
update from AMB senior management and AMBs outside
advisors about the progress of the discussions between AMB and
ProLogis. Senior management and AMBs outside advisors also
discussed the potential benefits and risks of the proposed
transaction at this meeting. Later that evening, at the
invitation of the ProLogis board of trustees,
Messrs. Moghadam, Jaquier, Olinger and Reilly and
Ms. Hemmenway met the ProLogis board of trustees and
Messrs. Nekritz and Antenucci for dinner in
San Francisco to introduce themselves and to discuss some
of the rationales for the business combination.
On January 21, 2011, the ProLogis board of trustees met
with members of senior management of ProLogis and their
financial and legal advisors. Representatives of Morgan Stanley
provided a detailed review and update to the ProLogis board of
trustees on the status of its financial due diligence services,
including its review of potential G&A, financial and
operational synergies. The representatives from Morgan Stanley
also presented an analysis of exchange ratio considerations.
Morgan Stanley then reviewed the financial structure and
benefits of a combined company. Legal representatives from
Greenberg Traurig, LLP and Mayer Brown LLP then provided the
ProLogis board of trustees with a summary of the structure of
the transaction and the proposed terms of the merger agreement.
At the conclusion of the meeting, the ProLogis board of trustees
expressed its support for continuing to pursue the potential
business combination and requested that management continue its
work as to the achievement of the potential G&A, financial
and operational synergies from the proposed business
combination. The board also considered the terms and conditions
upon which members of ProLogis management and ProLogis employees
would be offered continuing employment with the combined company
and appropriate retention and severance arrangements. At the
invitation of the ProLogis board of trustees, Mr. Moghadam
also joined the meeting to present his views on the strategic
priorities of the combined company.
During the afternoon of January 21, 2011 and during the
course of the day on January 22, 2011,
Messrs. Rakowich and Moghadam and other members of the
senior management teams of ProLogis and AMB continued to meet in
San Francisco to discuss in detail specific means for the
achievement of cost and financial synergies from the proposed
business combination as well as the integration of the two
companies and specific roles of personnel of both companies.
On the evening of January 22, 2011, Messrs. Moghadam
and Rakowich came to a preliminary understanding with respect to
the exchange ratio that they would present to their respective
boards. They had previously discussed proceeding on the basis of
an
at-the-market
exchange ratio, and, after examining the market prices of AMB
common stock and ProLogis common shares over various time
periods and reviewing whether those prices were consistent with
each companys internal estimates of value, they agreed to
present to their respective boards an exchange ratio of 0.4464.
37
On January 26, 2011, following published reports of a
potential transaction between AMB and ProLogis by various media
outlets, including the Wall Street Journal, members of
AMB management, members of ProLogis management and its board of
trustees and their respective legal and financial advisors held
discussions as to how the parties would respond to the
publications. AMB and ProLogis agreed that each company would
publish a press release stating that AMB and ProLogis were
engaged in discussions regarding a potential merger of equals,
in which the two companies would combine in an all-stock,
at-market transaction, based upon the unaffected trading prices
of the two companies stock prior to media reports of a
possible merger. Each press release further noted that it was
not certain if or when a definitive agreement would be reached.
On January 28 and 29, 2011, members of AMB management, members
of ProLogis management, and their respective legal and financial
advisors met at the offices of Wachtell Lipton to finalize
negotiation of the merger agreement and other transaction
documentation, including employment arrangements.
On January 29, 2011, the directors and trustees,
respectively, of AMB and ProLogis came to New York City for a
joint board dinner at the offices of J.P. Morgan.
On January 30, 2011, the AMB board of directors met to
consider the proposed strategic business combination of AMB and
ProLogis. At this meeting, AMB management, Wachtell Lipton and
J.P. Morgan provided an update to the AMB board on the
negotiation of the proposed transaction and the results of the
due diligence review of ProLogis, and reviewed the strategic
rationale and the anticipated benefits of the proposed
transaction to AMB stockholders. Representatives of
J.P. Morgan then reviewed with the AMB board the financial
terms of the proposed transaction and presented J.P.
Morgans financial analysis of the proposed Topco merger.
After further discussion with the AMB board, J.P. Morgan
then delivered to the AMB board its oral opinion (as
subsequently confirmed in writing in an opinion dated
January 30, 2011), as described under
Opinion of AMBs Financial Advisor,
that, as of the date of that opinion and based upon and subject
to the assumptions, procedures, factors, qualifications and
limitations set forth in its opinion, the exchange ratio of
0.4464 provided for in the Topco merger was fair, from a
financial point of view, to AMB. Representatives of Wachtell
Lipton discussed with the AMB board the duties applicable to its
decisions with respect to its review and consideration of the
proposed transaction, and reviewed the material terms of the
proposed merger agreement and the post-closing governance
arrangements, as well as compensation and benefits issues in
connection with the transaction. Following these presentations
and discussions, and other discussions by the AMB board
concerning, among other things, the matters described below
under AMBs Reasons for the Topco Merger;
Recommendations of the AMB Board of Directors, the AMB
board of directors, by a unanimous vote of all directors,
concluded that the proposed merger agreement and the
transactions contemplated thereby, including the Topco merger,
were advisable and in the best interests of AMB and its
stockholders, and approved the merger agreement.
On January 30, 2011, the ProLogis board of trustees also
met to consider the proposed strategic business combination of
AMB and ProLogis. At this meeting, ProLogis senior
management reviewed with the ProLogis board of trustees the
business terms of the proposed transaction. ProLogis management,
together with ProLogis legal and financial advisors,
reviewed the results of the due diligence review of AMB, and
reviewed the strategic rationale and the anticipated benefits of
the proposed transaction to ProLogis shareholders.
Representatives of Morgan Stanley then reviewed with the
ProLogis board of trustees the financial terms of the proposed
transaction and presented its financial analysis of the proposed
transaction. After further discussion with the ProLogis board of
trustees, Morgan Stanley then delivered to the ProLogis board of
trustees its oral opinion (as subsequently confirmed in writing
in an opinion dated January 30, 2011), as described under
Opinion of ProLogis Financial
Advisor, that, as of the date of that opinion and based
upon and subject to the assumptions, procedures, factors,
qualifications and limitations set forth in its opinion, the
exchange ratio of 0.4464 pursuant to the merger agreement was
fair, from a financial point of view, to the holders of ProLogis
common shares. Representatives of Mayer Brown LLP and Greenberg
Traurig, LLP discussed with the ProLogis board of trustees the
duties applicable to its decisions with respect to its review
and consideration of the proposed transaction, and reviewed the
material terms of the proposed merger agreement and the
post-closing governance arrangements, as well as compensation
and benefits issues in connection with the transaction.
Following these presentations and discussions, and other
discussion by the ProLogis board of trustees concerning, among
other things, the matters described below under
ProLogis Reasons for the Merger;
Recommendations of the ProLogis Board of Trustees, the
ProLogis board of trustees, by a unanimous vote of all trustees,
concluded that the proposed merger agreement and the
transactions contemplated
38
thereby, including the ProLogis merger and the Topco merger,
were advisable and in the best interests of ProLogis and its
shareholders, and approved the merger agreement.
Following the approvals of the AMB board of directors and
ProLogis board of trustees, AMB and ProLogis finalized and
executed the merger agreement and other transaction
documentation. On January 31, 2011, AMB and ProLogis issued
a joint press release announcing the transaction.
AMBs
Reasons for the Topco Merger; Recommendation of the AMB Board of
Directors
After careful consideration, the AMB board of directors, by a
unanimous vote of all directors, at a meeting held on
January 30, 2011, determined that the merger agreement and
the transactions contemplated thereby, including the Topco
merger, are advisable and in the best interests of AMB and its
stockholders, and approved the merger agreement. In reaching its
decision, the AMB board of directors consulted with AMBs
senior management and its financial and legal advisors, and
considered a number of factors that the board of directors
believed supported its decision, including the following
material factors:
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Strategic Considerations. The AMB board of
directors believed that the Merger will provide a number of
significant strategic opportunities, including the following:
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the opportunity to bring together two of the most complementary
customer franchises in real estate to create an integrated
industrial REIT and a stronger platform for value creation;
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the expectation that, by combining two companies with businesses
in complementary geographic regions, the combined company would
be a well-positioned and diversified global player that is
active on four continents with profitable scale, with
approximately 600 million square feet of modern
distribution facilities in important markets and logistics
corridors in 22 countries, enabling it to expand its
relationships with its large, multinational customers that
require space in multiple locations and to better serve the
needs of multi-market customers in about 78% of the global
economy in a profitable manner;
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the expectation that the combination will more rapidly advance a
number of priorities underway at AMB, including by improving
operational efficiencies, achieving profitable scale, deepening
the presence in AMBs current markets and expanding
AMBs geographic footprint by adding presence in the United
Kingdom and Eastern Europe;
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the expectation that the combined company would have an improved
cost of capital, with greater operating and financial
flexibility to capture opportunities across business cycles and
to manage currency risk;
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the expectation that the combined company would be able to
better serve the needs of its customers because of the larger
geographic footprint and the wider land bank of the combined
company, enabling the combined company to expand its
relationships with its large multinational customers that
require space in multiple locations;
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the expectation that the combination will result in improved
liquidity for the stockholders of AMB as a result of the
increased equity capitalization and the increased shareholder
base of the combined company;
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the expectation that the transaction will create synergies and
be immediately accretive, with the full expected annual gross
savings in general and administrative expenses of
$80 million expected to be realized by the end of 2012;
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the expectation that the combined company will be a leader in
the industrial real estate private capital sector, with a broad
range of product offerings across the risk/return spectrum and
across the Americas, Europe and Asia;
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the expectation that the combined company will have a
diversified customer base, with the largest customer accounting
for less than 2.6% of the overall rents of the combined company;
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the expectation that transactions contemplated by the merger
agreement will enhance the level of management depth and
experience of the combined company, while also providing for the
continuation of certain members of AMB senior management;
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the belief that the combined company will be stronger and more
diversified and therefore will be better positioned to benefit
from the growing recovery in the general economy and in rental
prices in particular; and
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the belief that there was no merger partner other than ProLogis
that would provide AMB with all of the strategic benefits noted
above, including the customer franchise and global scale that
ProLogis would provide.
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Fixed Exchange Ratio. AMB considered that the
fixed exchange ratio, which will not fluctuate as a result of
changes in the price of AMB common stock or ProLogis common
shares, provides certainty to the shareholders of both parties
as to their respective pro forma percentage ownership of the
combined company.
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Merger of Equals. The combination has been
structured as a merger of equals, with an exchange ratio that
reflected an
at-the-market
transaction based on the unaffected market prices of AMB common
stock and ProLogis common shares and no payment of a control
premium to the stockholders of AMB or the shareholders of
ProLogis. The AMB board of directors viewed this structure as
favorable, in that AMB is engaging in a strategic combination
with a company with similarities to AMB. The AMB board of
directors also considered that the combination would allow AMB
and its stockholders to achieve many of the same objectives of a
large acquisition (e.g., increasing size and total market
capitalization) without paying the premium typical of many
acquisition transactions. Further, the AMB board of directors
believed that the combination will allow AMB stockholders to
participate in the growth and future value creation of the
combined company and to share pro rata in the benefits of the
expected synergies.
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Opinion of Financial Advisor. The AMB board of
directors considered the opinion of J.P. Morgan that, as of
January 30, 2011 and based upon and subject to the
assumptions, procedures, factors, qualifications and limitations
set forth in its opinion, the exchange ratio of 0.4464 provided
for in the Topco merger was fair, from a financial point of
view, to AMB, as more fully described elsewhere in this joint
proxy statement/prospectus.
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Participation in Future Appreciation. The AMB
board of directors considered the fact that the Merger would
allow AMB stockholders to participate in potential further
appreciation of the combined company after the Merger.
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Tax-Free Transaction. The AMB board of
directors considered the expectation that the Merger will
generally qualify as a tax-free transaction to the AMB
stockholders for U.S. federal income tax purposes.
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Governance. The AMB board of directors
considered that the following governance arrangements provided
by the merger agreement would enable continuity of management
and an effective and timely integration of the two
companies operations:
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the board of directors of the combined company would be composed
of five appointees chosen by the AMB board of directors and six
appointees chosen by the ProLogis board of trustees, and the key
leadership of the combined company after completion of the
Merger would be drawn from senior executives from each of AMB
and ProLogis; and
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the arrangements providing for Mr. Moghadam of AMB to serve
as chairman of the board and co-chief executive officer of the
combined company and Mr. Rakowich of ProLogis to serve as
chairman of the executive committee of the board and co-chief
executive officer of the combined company after the Merger until
December 31, 2012, at which point Mr. Moghadam would
remain as chairman and become sole chief executive officer of
the combined company.
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Familiarity with Businesses. The AMB board of
directors considered its knowledge of AMBs business,
operations, financial condition, earnings and prospects and of
ProLogiss business, operations, financial condition,
earnings and prospects, taking into account the results of
AMBs due diligence review of
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ProLogis, as well as its knowledge of the current and
prospective environment in which AMB and ProLogis operate,
including economic and market conditions.
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High Likelihood of Consummation. The AMB board
of directors considered the commitment on the part of both
parties to complete the business combination between AMB and
ProLogis pursuant to their respective obligations under the
terms of the merger agreement, and the likelihood that the
regulatory and stockholder approvals needed to complete the
transaction would be obtained in a timely manner.
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The AMB board of directors also considered a variety of risks
and other potentially negative factors concerning the merger
agreement and the Merger, including the following:
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the possibility that the Merger may not be completed, or that
completion may be unduly delayed, for reasons beyond the control
of AMB or ProLogis;
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the risk that failure to complete the Merger could negatively
affect the stock prices and the future business and financial
results of AMB;
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the risks associated with integrating two businesses, including
the risks associated with having two chief executive officers
for a period of time and the risk that the combined company may
experience operational interruptions or the loss of key
employees or customers;
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the risk associated with being able to accomplish the continuity
of management and management succession contemplated by the
merger agreement;
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the risk of not capturing all of the anticipated operational
synergies and cost savings between AMB and ProLogis and the risk
that other anticipated benefits might not be realized on the
expected timeframe or at all;
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the substantial costs to be incurred in connection with the
transaction, including the costs of integrating the businesses
of AMB and ProLogis, termination and severance costs of both
companies, system conversions, and the transaction expenses
arising from the Merger, which are estimated to be approximately
$160 million to $180 million in the aggregate;
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the weaker debt coverage (not taking into account expected
synergies or the business plan of the combined company) and
higher leverage that the combined company was expected to have
relative to AMB currently;
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the restrictions on the conduct of AMBs business between
the date of the merger agreement and the date of the
consummation of the proposed Merger;
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the merger agreements provisions imposing restrictions on
AMB from soliciting alternative transactions and the termination
fee of $210 million and up to $20 million in expense
reimbursement amount that AMB would be required to pay if the
merger agreement is terminated under certain circumstances could
limit the willingness of a third party to propose a competing
business combination transaction with AMB;
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the risk that the transactions contemplated by the merger
agreement could trigger the termination of, and mandatory
prepayments of all amounts outstanding under, AMBs
existing credit agreements unless appropriate lender consents or
waivers are received or replacement credit agreements of the
combined company are entered into in connection with the closing
of the Merger, as anticipated;
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the potential risk of diverting management focus and resources
from other strategic opportunities and from operational matters
while working to implement the Merger; and
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the other factors described under Risk Factors.
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In addition to considering the factors described above, the AMB
board of directors considered the fact that some of AMBs
directors and executive officers have other interests in the
Merger that are different from, or in addition to, the interests
of AMB stockholders, as discussed under
Interests of AMB Directors and Executive Officers in the
Merger.
The AMB board of directors concluded that the potentially
negative factors associated with the Merger were outweighed by
the potential benefits that it expected the AMB stockholders
would achieve as a result of the Merger.
41
Accordingly, the AMB board of directors determined that the
merger agreement and the transactions contemplated thereby,
including the Merger, are advisable, fair to, and in the best
interests of, AMB and its stockholders.
The above discussion of the factors considered by the AMB board
of directors is not intended to be exhaustive, but does set
forth the material factors considered by the AMB board of
directors. In reaching its decision to approve the merger
agreement and the transactions contemplated by the merger
agreement, the AMB board of directors did not quantify or assign
any relative weights to the factors considered, and individual
directors may have given different weights to different factors.
The AMB board of directors considered all these factors as a
whole, including discussions with, and questioning of, AMB
management and AMBs financial and legal advisors, and
overall considered the factors to be favorable to, and to
support, its determination.
For the reasons set forth above, the AMB board of directors
unanimously determined that the merger agreement and the
transactions contemplated thereby, including the Topco merger,
are advisable and in the best interests of AMB and its
stockholders, and unanimously approved the merger agreement. The
AMB board of directors unanimously recommends that the AMB
stockholders vote FOR the Topco merger, including
the issuance of AMB common stock and preferred stock to ProLogis
shareholders in connection with the Topco merger,
FOR the bylaw amendment, and FOR the
charter amendment.
ProLogis
Reasons for the Merger; Recommendation of the ProLogis Board of
Trustees
After careful consideration, the ProLogis board of trustees, by
a unanimous vote of all of its trustees, at a meeting held on
January 30, 2011, determined that the merger agreement and
the transactions contemplated thereby, including the ProLogis
merger and the Topco merger, are advisable and in the best
interests of ProLogis and its shareholders, and approved the
merger agreement. In reaching its decision, the ProLogis board
of trustees consulted with ProLogis senior management and
its financial and legal advisors, and considered a number of
factors that the board of trustees believed supported its
decision, including the following material factors:
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Strategic Considerations. The ProLogis board
of trustees believed that the Merger will provide a number of
significant strategic opportunities, including the following:
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The combined company was expected to have approximately
600 million square feet of industrial distribution space
worldwide. The combination was expected to enhance
ProLogis platform in North America, Western Europe and
Japan, while giving ProLogis immediate and less costly access to
China and Brazil through AMBs existing platform than that
which ProLogis could have accomplished on its own in the current
economic cycle. ProLogis believed that the combined company will
benefit from the combination of complementary assets and
resources, enabling the combined company to expand its
relationships with its large, multinational customers that
require space in multiple locations and to better serve the
needs of its multinational customers. In addition, ProLogis
believed that the combined company will have a diversified
customer base, with the largest customer accounting for less
than 2.6% of the overall rents of the combined company.
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The ProLogis board of trustees considered that ProLogis is
engaging in a strategic combination with a company with
similarities to ProLogis, and believed that the combination will
more rapidly advance a number of priorities underway at
ProLogis, including improving operational efficiencies,
increasing assets in major logistics markets and increasing
asset utilization by stabilizing the operating portfolio,
leasing up the development portfolio and monetizing the land
bank.
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The combined company was expected to have an estimated total
equity market capitalization of $14 billion and to be among
the largest REITs as measured by enterprise value as well as
total assets under management. The combined company was expected
to have total assets owned and under management of approximately
$46 billion. As a result of its larger size and enhanced
balance sheet and credit profile, the combined company is
expected to have greater financial flexibility and improved
access to capital markets with a lower cost of capital.
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The combined company was expected to have approximately
$25.8 billion of assets under management in 19 funds on
four continents, making it one of the largest and most
diversified investment management businesses in the real estate
industry. This was expected to allow the combined company to
provide a
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broader spectrum of product offerings, making the combined
company an attractive option for institutional investors seeking
exposure to the industrial distribution sector across a variety
of risk/return profiles.
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ProLogis believed that the combined company can generate
significant synergies by eliminating duplicative general and
administrative expenses, with the full expected annual gross
savings in general and administrative expenses of
$80 million expected to be realized by the end of 2012.
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ProLogis believed that the combination will result in improved
liquidity for its shareholders as a result of the increased
equity capitalization and the increased shareholder base of the
combined company.
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ProLogis believed that the combination will strengthen
ProLogis balance sheet as the combined company was
expected to initially have a total debt to total undepreciated
real estate assets ratio of 42.6%, as opposed to a ratio of
44.0% for ProLogis on a stand-alone basis as of
December 31, 2010.
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ProLogis believed that transactions contemplated by the merger
agreement will enhance the level of management depth and
experience of the combined company, while also providing for the
continuation of certain members of ProLogis senior management.
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ProLogis believed that there was no merger partner other than
AMB that would provide ProLogis with all of the strategic
benefits noted above, and therefore ProLogis did not seek
alternative business combination transactions.
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ProLogis Name. The ProLogis board of trustees
also considered that the combined company would continue to use
the ProLogis name.
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Transaction Structure. The combined company
will be structured as an UPREIT, which the ProLogis board of
trustees believes will give the combined company a greater
ability to acquire assets using a
tax-deferred
acquisition currency. In addition, ProLogis noted that the
transaction structure did not present any unusual regulatory or
third-party required approvals.
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Fixed Exchange Ratio. ProLogis believed that
the fixed exchange ratio, which will not fluctuate as a result
of changes in the price of ProLogis common shares or AMB common
stock, provides certainty to the shareholders of both parties as
to their respective pro forma percentage ownership of the
combined company.
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Merger of Equals. The combination has been
structured as a merger of equals, with an exchange ratio that
reflected an
at-the-market
transaction based on the unaffected market prices of ProLogis
common shares and AMB common stock and no payment of a control
premium to the shareholders of ProLogis or the stockholders of
AMB. The ProLogis board of trustees also considered that the
combination would allow ProLogis and its shareholders to achieve
many of the same objectives of a large acquisition (e.g.,
increasing size and total market capitalization) without paying
the premium typical of many acquisition transactions. Further,
the ProLogis board of trustees believed that the combination
will allow ProLogis shareholders to participate in the growth
and future value creation of the combined company and to share
pro rata in the benefits of the expected synergies.
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Participation in Future Appreciation. The
ProLogis board of trustees considered the fact that the Merger
would allow ProLogis shareholders to participate in potential
further appreciation of the combined company after the Merger.
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Tax-Free Transaction. The ProLogis board of
trustees considered the expectation that the Merger will
generally qualify as a tax-free transaction to the ProLogis
shareholders for U.S. federal income tax purposes.
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Governance. The ProLogis board of trustees
considered that the following governance arrangements provided
by the merger agreement would enable continuity of management
and an effective and timely integration of the two
companies operations:
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the board of directors of the combined company would be composed
of a majority of appointees chosen by the ProLogis board of
trustees, and the key leadership after completion of the Merger
would be drawn from senior executives from each of ProLogis and
AMB; and
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the arrangements providing for Mr. Rakowich of ProLogis to
serve as chairman of the executive committee of the board and
co-chief executive officer of the combined company of the
combined company after the Merger until December 31, 2012.
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Opinion of Financial Advisor. ProLogis
board of trustees also considered the opinion of Morgan Stanley
that, as of January 30, 2011 and based upon and subject to
the assumptions, procedures, factors, qualifications and
limitations set forth in its opinion, the exchange ratio of
0.4464 pursuant to the merger agreement was fair, from a
financial point of view, to the holders of ProLogis common
shares, as more fully described elsewhere in this joint proxy
statement/prospectus.
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Familiarity with Businesses. The ProLogis
board of trustees considered its knowledge of ProLogis
business, operations, financial condition, earnings and
prospects and of AMBs business, operations, financial
condition, earnings and prospects, taking into account the
results of ProLogs due diligence review of AMB, as well as
its knowledge of the current and prospective environment in
which ProLogis and AMB operate, including economic and market
conditions.
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ProLogis board of trustees also considered a variety of
risks and other potentially negative factors concerning the
merger agreement and the Merger, including the following:
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The operations, technologies and personnel of the two companies
may not be successfully integrated. The combined company may
also experience operational interruptions or the loss of key
employees or customers.
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The proposed transaction presents the potential risk of
diverting management focus and resources from other strategic
opportunities and from operational matters while working to
implement the Merger.
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The combined company may not realize the synergies and cost
savings that ProLogis expects from the combination. In addition,
many of the benefits the combined company hopes to realize as
part of the combination are difficult to quantify and may only
be realized, if at all, over time.
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ProLogis and AMB are expected to incur substantial costs in
connection with the transactions contemplated by the merger
agreement, including the costs of integrating the businesses of
AMB and ProLogis, termination and severance costs of both
companies, system conversions, and the transaction expenses
arising from the Merger, which are estimated to be approximately
$160 million to $180 million in the aggregate.
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Completion of the transactions contemplated by the merger
agreement requires lender consents or waivers under certain
existing debt of ProLogis. If ProLogis does not receive any of
such lender consents or waivers (or refinance such debt), and
all of such lenders elect to declare a default and accelerate
the maturity of their respective indebtedness, ProLogis could be
obligated to immediately repay the aggregate outstanding
principal amount of such debt plus prepayment penalties.
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The merger agreement includes restrictions on the conduct of
ProLogis business between the date of the merger agreement
and the date of the consummation of the proposed Merger.
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The Merger may not be completed, or completion may be unduly
delayed, for reasons beyond the control of ProLogis or AMB
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The risk that failure to complete the Merger could negatively
affect the stock prices and future business and financial
results of ProLogis.
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The merger agreements provisions imposing restrictions on
ProLogis soliciting alternative transactions and the
termination fee of up to $315 million and up to
$20 million in expense reimbursement that ProLogis would be
required to pay if the merger agreement is terminated under
certain circumstances could limit the willingness of a third
party to propose a competing business combination transaction
with ProLogis.
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ProLogis board of trustees also considered the other
factors described under Risk Factors.
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In addition to considering the factors described above, the
ProLogis board of trustees considered the fact that some of
ProLogis trustees and executive officers have other
interests that are different from, or in addition to, the
44
interests of the ProLogis shareholders, as discussed under
Interests of ProLogis Trustees and Officers
in the Merger.
The ProLogis board of trustees concluded that the potentially
negative factors associated with the Merger were outweighed by
the potential benefits that it expected the ProLogis
shareholders would achieve as a result of the Merger.
Accordingly, the ProLogis board of trustees determined that the
merger agreement and the transactions contemplated thereby,
including the ProLogis merger and the Topco merger, are
advisable, fair to, and in the best interests of, ProLogis and
its shareholders.
The above discussion of the factors considered by ProLogis
board of trustees is not intended to be exhaustive, but does set
forth the material factors considered by ProLogis board of
trustees. In reaching its decision to approve the merger
agreement and the transactions contemplated by the merger
agreement, the ProLogis board of trustees did not quantify or
assign any relative weights to the factors considered, and
individual trustees may have given different weights to
different factors. The ProLogis board of trustees considered all
these factors as a whole, including discussions with, and
questioning of, ProLogis management and ProLogiss
financial and legal advisors, and overall considered the factors
to be favorable to, and to support, its determination.
For the reasons set forth above, the ProLogis board of
trustees unanimously determined that the merger agreement and
the transactions contemplated thereby, including the ProLogis
merger and Topco merger, are advisable and in the best interests
of ProLogis and its shareholders, and unanimously approved the
merger agreement. The ProLogis board of trustees unanimously
recommends that the ProLogis shareholders vote FOR
the Merger.
Opinion
of AMBs Financial Advisor
At the meeting of the AMB board of directors on January 30,
2011, J.P. Morgan rendered its oral opinion to the AMB
board of directors that, as of such date and based upon and
subject to the factors and assumptions set forth in its written
opinion, the exchange ratio in the Topco merger was fair from a
financial point of view to AMB. J.P. Morgan subsequently
confirmed its oral opinion by delivering its written opinion,
dated January 30, 2011, to the AMB board of directors. No
limitations were imposed by the AMB board of directors upon
J.P. Morgan with respect to the investigations made or
procedures followed by it in rendering its opinion.
The full text of the written opinion of J.P. Morgan,
dated January 30, 2011, which sets forth, among other
things, the assumptions made, procedures followed, matters
considered and limitations on the review undertaken in rendering
its opinion, is attached to this joint proxy
statement/prospectus as Annex D. The summary of
J.P. Morgans opinion set forth in this joint proxy
statement/prospectus is qualified in its entirety by reference
to the full text of the opinion. AMB stockholders should read
this opinion carefully and in its entirety.
J.P. Morgans opinion is addressed to the AMB board of
directors, is directed only to the fairness from a financial
point of view of the exchange ratio in the Topco merger to AMB
as of the date of the opinion, and does not address any other
aspect of the transactions contemplated by the merger agreement.
J.P. Morgan provided its advisory services and opinion for
the information and assistance of the AMB board of directors in
connection with its consideration of the Topco merger. The
opinion of J.P. Morgan does not constitute a recommendation
as to how any AMB stockholder should vote with respect to the
Topco merger. In addition, this opinion does not in any manner
address the price at which AMB common stock or ProLogis common
shares will trade at any time subsequent to the date of the
opinion. J.P. Morgans opinion was approved by
J.P. Morgans fairness committee.
In arriving at its opinion, J.P. Morgan, among other things:
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reviewed a draft dated January 29, 2011 of the merger
agreement;
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reviewed certain publicly available business and financial
information concerning AMB and ProLogis and the industries in
which they operate;
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compared the financial and operating performance of AMB and
ProLogis with publicly available information concerning certain
other companies J.P. Morgan deemed relevant and reviewed
the current and
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historical market prices of AMB common stock and ProLogis common
shares and certain publicly traded securities of such other
companies;
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reviewed certain internal financial data, analyses and forecasts
prepared or approved by management of AMB or management of
ProLogis relating to their respective businesses, as well as the
estimated amount and timing of the cost savings and related
expenses and synergies expected to result from the Topco merger
(which we refer to as the synergies); and
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performed such other financial studies and analyses and
considered such other information as J.P. Morgan deemed
appropriate for the purposes of its opinion.
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In addition, J.P. Morgan held discussions with certain
members of the management of AMB and ProLogis with respect to
certain aspects of the Topco merger, and the past and current
business operations of AMB and ProLogis, the financial condition
and future prospects and operations of AMB and ProLogis, the
effects of the Topco merger on the financial condition and
future prospects of AMB and certain other matters
J.P. Morgan believed necessary or appropriate to its
inquiry.
In giving its opinion, J.P. Morgan relied upon and assumed
the accuracy and completeness of all information that was
publicly available or was furnished to or discussed with
J.P. Morgan by AMB and ProLogis or otherwise reviewed by or
for J.P. Morgan, and J.P. Morgan did not independently
verify (nor did J.P. Morgan assume responsibility or
liability for independently verifying) any such information or
its accuracy or completeness. J.P. Morgan did not conduct
and was not provided with any valuation or appraisal of any
assets or liabilities (including real estate assets and
liabilities), nor did J.P. Morgan evaluate the solvency of
AMB, ProLogis or any other party to the merger agreement under
any state or federal laws relating to bankruptcy, insolvency or
similar matters. In relying on financial analyses and forecasts
provided to J.P. Morgan or derived therefrom, including the
synergies, J.P. Morgan assumed that they had been
reasonably prepared based on assumptions reflecting the best
then-available estimates and judgments by management of AMB or
management of ProLogis, as applicable, as to the expected future
results of operations and financial condition of AMB and
ProLogis, respectively, to which such analyses or forecasts
relate. J.P. Morgan expressed no view as to such analyses
or forecasts (including the synergies) or the assumptions on
which they were based. J.P. Morgan also assumed that each
of the ProLogis merger and the Topco merger will qualify as a
tax-free reorganization for U.S. federal income tax
purposes, and will be consummated as described in the merger
agreement, and that the definitive merger agreement does not
differ in any material respects from the draft thereof furnished
to J.P. Morgan. J.P. Morgan also assumed that the
representations and warranties made by AMB and ProLogis in the
merger agreement and the related agreements are and will be true
and correct in all respects material to J.P. Morgans
analysis. J.P. Morgan is not a legal, regulatory or tax
expert and relied on the assessments made by advisors to AMB
with respect to such issues. J.P. Morgan further assumed
that all governmental, regulatory or other consents and
approvals necessary for the consummation of the Topco merger
will be obtained without any material adverse effect on AMB or
ProLogis, or on the contemplated benefits of the Topco merger.
J.P. Morgans opinion is necessarily based on economic,
market and other conditions as in effect on, and the information
made available to J.P. Morgan as of, the date of
J.P. Morgans opinion. It should be understood that
subsequent developments may affect J.P. Morgans
opinion and J.P. Morgan does not have any obligation to
update, revise, or reaffirm its opinion. J.P. Morgans
opinion is limited to the fairness, from a financial point of
view, to AMB of the exchange ratio in the Topco merger and
J.P. Morgan expressed no opinion as to the fairness of the
Topco merger to the holders of any class of securities,
creditors or other constituencies of AMB or as to the underlying
decision by AMB to engage in the Topco merger. Furthermore,
J.P. Morgan expressed no opinion with respect to the amount
or nature of any compensation to any officers, directors, or
employees of any party to the Topco merger, or any class of such
persons relative to the exchange ratio or with respect to the
fairness of any such compensation. J.P. Morgan expressed no
opinion as to the price at which AMB common stock or ProLogis
common shares will trade at any time subsequent to the date of
the opinion.
In accordance with customary investment banking practice,
J.P. Morgan employed generally accepted valuation methods
in reaching its opinion. The following is a summary of certain
of the financial analyses undertaken by J.P. Morgan and
delivered to the AMB board of directors on January 30,
2011, which analyses were among those considered by
J.P. Morgan in connection with delivering its opinion.
46
Historical
Exchange Ratio Analysis
J.P. Morgan calculated (1) the daily implied historical
exchange ratios during the five years ending January 25,
2011 by dividing the daily volume weighted average price (which
we refer to as VWAP) per ProLogis common share by
that of AMB common stock for each trading day during that
period, (2) the average of those daily implied historical
exchange ratios for the
one-day,
one-week, two-week, since January 3, 2011, four-week,
12-week,
26-week,
52-week, three-year and five-year periods ending
January 25, 2011 and (3) the historical exchange ratio
for the
one-day
closing price by dividing the closing price per share as of
January 25, 2011 of ProLogis common shares by that of AMB
common stock. J.P. Morgan also noted the median, low and
high exchange ratios for each period referenced in
clause (2) above. The analysis resulted in the following
implied exchange ratios for the periods indicated, as compared
to the exchange ratio of 0.4464x provided for in the Topco
merger:
|
|
|
|
|
|
|
Exchange Ratio
|
|
|
1-day
closing price
|
|
|
0.4412
|
x
|
1-day VWAP
|
|
|
0.4374
|
x
|
1-week average VWAP
|
|
|
0.4326
|
x
|
2-week average VWAP
|
|
|
0.4409
|
x
|
Since January 3, 2011 average VWAP
|
|
|
0.4440
|
x
|
4-week average VWAP
|
|
|
0.4462
|
x
|
12-week average VWAP
|
|
|
0.4509
|
x
|
26-week average VWAP
|
|
|
0.4488
|
x
|
52-week average VWAP
|
|
|
0.4618
|
x
|
3-year
average VWAP
|
|
|
0.6141
|
x
|
5-year
average VWAP
|
|
|
0.7930
|
x
|
J.P. Morgan noted that a historical exchange ratio analysis is
not a valuation methodology and that such analysis was presented
merely for reference purposes.
Contribution
Analysis
J.P. Morgan analyzed the contribution of each of AMB and
ProLogis to the pro forma combined company with respect to
EBITDA (as defined in AMB Unaudited Prospective
Financial Information), FFO (as defined as Core
FFO in AMB Unaudited Prospective Financial
Information) and AFFO (as defined in AMB
Unaudited Prospective Financial Information) for CY11 and
CY12. For purposes of the contribution analysis,
J.P. Morgan assumed that the contribution with respect to
EBITDA reflected each companys contribution to the
combined companys pro forma firm value. Equity value
contributions and relative ownership interests were then derived
by adjusting firm value contributions for outstanding net debt,
preferred equity and non-controlling interests of both
companies. J.P. Morgan further assumed that the
contributions with respect to FFO and AFFO reflected each
companys contribution to the combined companys pro
forma equity value and relative ownership interests. The
analyses yielded the following pro forma diluted equity value
contributions and ownership interests and implied exchange
ratios, as compared to the pro forma diluted ownership interest
of 40.4% implied by the exchange ratio provided for in the Topco
merger:
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
CY11
|
|
|
|
CY12
|
|
|
|
|
|
|
|
AMB contribution / ownership
|
|
|
33.9
|
%
|
|
|
37.3
|
%
|
Implied exchange ratio
|
|
|
0.5892
|
x
|
|
|
0.5095
|
x
|
FFO
|
|
|
CY11
|
|
|
|
CY12
|
|
|
|
|
|
|
|
AMB contribution / ownership
|
|
|
39.9
|
%
|
|
|
38.8
|
%
|
Implied exchange ratio
|
|
|
0.4568
|
x
|
|
|
0.4784
|
x
|
AFFO
|
|
|
CY11
|
|
|
|
CY12
|
|
|
|
|
|
|
|
AMB contribution / ownership
|
|
|
39.4
|
%
|
|
|
40.5
|
%
|
Implied exchange ratio
|
|
|
0.4662
|
x
|
|
|
0.4448
|
x
|
47
Public
Trading Analysis
Using publicly available information, including published equity
research analysts estimates of funds from operations (FFO)
per share and estimated adjusted funds from operations (AFFO)
per share for calendar year 2011 (which we refer to as
CY11) and calendar year 2012 (which we refer to as
CY12), J.P. Morgan analyzed certain trading
multiples of selected other publicly traded REITs. None of the
selected companies are identical to AMB or ProLogis. However,
the selected companies were chosen because they are publicly
traded REITs with operations that, for purposes of the analysis
of J.P. Morgan, may be considered similar to those of AMB
and ProLogis, including primarily the ownership of commercial
real estate, as well as tenure in the public markets,
capitalization strategies, relative market position and
management leadership qualities. These other REITS were as
follows:
|
|
|
|
|
Simon Property Group, Inc.;
|
|
|
|
Boston Properties, Inc.;
|
|
|
|
Equity Residential;
|
|
|
|
Federal Realty Investment Trust; and
|
|
|
|
Public Storage.
|
For each of the other REITs, J.P. Morgan calculated the
multiple of equity market price per share to the median estimate
of its CY11 and CY12 FFO per share and AFFO per share, as
reported by equity research analysts as of January 25,
2011. J.P. Morgan also calculated the same trading
multiples for AMB and ProLogis based on equity research analyst
data and data provided by AMB management. In J.P. Morgans
view, the FFO and AFFO metrics used by equity research analysts
and AMB management were sufficiently similar so as not to
materially affect this analysis.
The following presents the results of this analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price / FFO per
|
|
|
|
|
|
|
Share Multiple
|
|
Price / AFFO per Share Multiple
|
|
|
|
|
CY11
|
|
CY12
|
|
CY11
|
|
CY12
|
|
Simon Property Group, Inc.
|
|
Median equity research estimate
|
|
15.2x
|
|
14.2x
|
|
17.2x
|
|
16.5x
|
Boston Properties, Inc.
|
|
Median equity research estimate
|
|
21.0x
|
|
19.1x
|
|
32.7x
|
|
27.2x
|
Equity Residential
|
|
Median equity research estimate
|
|
21.4x
|
|
18.5x
|
|
25.4x
|
|
22.4x
|
Federal Realty Investment Trust
|
|
Median equity research estimate
|
|
19.6x
|
|
18.7x
|
|
22.9x
|
|
21.8x
|
Public Storage
|
|
Median equity research estimate
|
|
19.3x
|
|
18.2x
|
|
21.0x
|
|
19.9x
|
Other REITs
|
|
Median equity research estimate
|
|
19.6x
|
|
18.5x
|
|
22.9x
|
|
21.8x
|
AMB
|
|
Median equity research estimate
|
|
24.0x
|
|
21.4x
|
|
33.7x
|
|
28.9x
|
|
|
Management estimate
|
|
24.4x
|
|
22.2x
|
|
30.7x
|
|
24.7x
|
ProLogis
|
|
Median equity research estimate
|
|
22.2x
|
|
18.6x
|
|
29.3x
|
|
24.2x
|
|
|
Management estimate
|
|
23.4x
|
|
20.2x
|
|
28.9x
|
|
24.1x
|
J.P. Morgan applied a range of these multiples to the CY11 and
CY12 FFO per share and AFFO per share estimates for AMB and
ProLogis as provided by AMB management, which resulted in the
following range of implied share prices for each share of AMB
and ProLogis, as compared to the (1) closing price per
share of AMB common stock as of January 25, 2011 of $33.18,
(2) closing price per ProLogis common share as of
January 25, 2011 of $14.64 and (3) implied price per
share of ProLogis common shares of $14.81 based on the exchange
ratio of
48
0.4464x provided for in the Topco merger applied to the closing
price per share of AMB common stock as of January 25, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CY11 FFO per Share
|
|
|
CY12 FFO per Share
|
|
|
|
|
|
|
|
|
|
Implied
|
|
|
|
|
|
Implied
|
|
|
|
|
|
|
Multiple
|
|
|
Share Price
|
|
|
Multiple
|
|
|
Share Price
|
|
|
AMB
|
|
|
High
|
|
|
|
25x
|
|
|
$
|
34.10
|
|
|
|
23x
|
|
|
$
|
34.30
|
|
|
|
|
Low
|
|
|
|
19x
|
|
|
$
|
25.90
|
|
|
|
18x
|
|
|
$
|
26.90
|
|
ProLogis
|
|
|
High
|
|
|
|
25x
|
|
|
$
|
15.60
|
|
|
|
23x
|
|
|
$
|
16.70
|
|
|
|
|
Low
|
|
|
|
19x
|
|
|
$
|
11.90
|
|
|
|
18x
|
|
|
$
|
13.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CY11 AFFO per share
|
|
|
CY12 AFFO per share
|
|
|
|
|
|
|
|
|
|
Implied
|
|
|
|
|
|
Implied
|
|
|
|
|
|
|
Multiple
|
|
|
share price
|
|
|
Multiple
|
|
|
share price
|
|
|
AMB
|
|
|
High
|
|
|
|
34x
|
|
|
$
|
36.80
|
|
|
|
29x
|
|
|
$
|
38.90
|
|
|
|
|
Low
|
|
|
|
23x
|
|
|
$
|
24.90
|
|
|
|
22x
|
|
|
$
|
29.50
|
|
ProLogis
|
|
|
High
|
|
|
|
34x
|
|
|
$
|
17.20
|
|
|
|
29x
|
|
|
$
|
17.60
|
|
|
|
|
Low
|
|
|
|
23x
|
|
|
$
|
11.60
|
|
|
|
22x
|
|
|
$
|
13.30
|
|
J.P. Morgan compared the results of the implied equity values
per share for AMB and ProLogis. For each comparison,
J.P. Morgan compared the highest equity value per share for
ProLogis to the lowest equity value per share for AMB to derive
the highest exchange ratio implied by each pair of estimates.
J.P. Morgan also compared the lowest equity value per share
for ProLogis to the highest equity value per share for AMB to
derive the lowest exchange ratio implied by each pair of
estimates. The implied exchange ratios resulting from this
analysis, as compared to the exchange ratio of 0.4464x provided
for in the Topco merger, were:
|
|
|
|
|
|
|
|
|
|
|
Exchange Ratio
|
|
|
FFO per Share
|
|
AFFO per Share
|
|
|
CY11
|
|
CY12
|
|
CY11
|
|
CY12
|
|
Highest ProLogis equity value per share to lowest AMB equity
value per share
|
|
0.6023x
|
|
0.6208x
|
|
0.6908x
|
|
0.5966x
|
Lowest ProLogis equity value per share to highest AMB equity
value per share
|
|
0.3490x
|
|
0.3819x
|
|
0.3152x
|
|
0.3419x
|
Dividend
Discount Analysis
J.P. Morgan performed a dividend discount analysis of AMB common
stock and ProLogis common shares for the purpose of determining
the fully diluted implied equity value per share of each
company. In performing this analysis, J.P. Morgan used five-year
projections of dividends per share for AMB as provided by AMB
management and five-year extrapolations thereof that were
reviewed and approved by AMB management. J.P. Morgan also used
five-year projections of dividend per share payout ratios (as a
percentage of FFO per share) for ProLogis as provided by AMB
management and five-year extrapolations thereof that were
reviewed and approved by AMB management. The dividend per share
payout ratios (as a percentage of FFO per share) for ProLogis
that were provided to J.P. Morgan by AMB management for 2011,
2012, 2013, 2014 and 2015, respectively, were as follows: 71.7%;
68.6%; 64.2%; 67.0%; and 68.5%. A dividend discount analysis is
a method of evaluating the equity value of a company using
estimates of future dividends to shareholders generated by the
company and taking into consideration the time value of money
with respect to those future dividends by calculating their
present value. Present value refers to
the current value of the future dividends to shareholders paid
by the company and is obtained by discounting those future
dividends back to the present using a discount rate that takes
into account macro-economic assumptions, estimates of risk, the
opportunity cost of capital and other appropriate factors.
Based on the dividends AMB was projected to distribute during
fiscal years 2011 through 2020, J.P. Morgan discounted the
dividend stream to present values using a range of discount
rates from 8.25% to 8.75%, which was chosen by J.P. Morgan
based upon an analysis of the cost of equity for AMB derived
from the capital asset pricing model. J.P. Morgan also
calculated a range of terminal values for the company at the end
of the
10-year
period
49
ending fiscal year 2020 by applying a perpetual dividend growth
rate ranging from 4.25% to 4.75%, which was chosen by J.P.
Morgan based upon AMB managements estimates for AMBs
long-term FFO growth rate, and discounted the terminal value
using a range of discount rates from 8.25% to 8.75%, which was
chosen by J.P. Morgan based upon an analysis of the cost of
equity for AMB derived from the capital asset pricing model.
Terminal value refers to the capitalized value of
all future dividends to shareholders paid by the company for
periods beyond the financial forecast.
Based on the dividends ProLogis was projected to distribute
during fiscal years 2011 through 2020, J.P. Morgan
discounted the dividend stream to present values using a range
of discount rates from 8.75% to 9.25%, which was chosen by
J.P. Morgan based upon an analysis of the cost of equity
for ProLogis derived from the capital asset pricing model.
J.P. Morgan also calculated a range of terminal values for
the company at the end of the
10-year
period ending fiscal year 2020 by applying a perpetual dividend
growth rate ranging from 4.25% to 4.75%, which was chosen by
J.P. Morgan based upon AMB managements estimates for
ProLogis long-term FFO growth rate, and discounted the
terminal value using a range of discount rates from 8.75% to
9.25%, which was chosen by J.P. Morgan based upon an analysis of
the cost of equity for ProLogis derived from the capital asset
pricing model.
The analysis yielded the following implied equity value per
share, compared to the implied ProLogis price per common share
of $14.81 based on the exchange ratio of 0.4464x provided for in
the Topco merger applied to the closing price per share of AMB
common stock as of January 25, 2011:
|
|
|
|
|
|
|
|
|
|
|
AMB
|
|
ProLogis
|
|
High
|
|
$
|
39.40
|
|
|
$
|
16.00
|
|
Low
|
|
$
|
31.70
|
|
|
$
|
13.20
|
|
J.P. Morgan compared the results for AMB to the results for
ProLogis. For each comparison, J.P. Morgan compared the
highest equity value per share for ProLogis to the lowest equity
value per share for AMB to derive the highest exchange ratio
implied by each pair of estimates. J.P. Morgan also
compared the lowest equity value per share for ProLogis to the
highest equity value per share for AMB to derive the lowest
exchange ratio implied by each pair of estimates. The implied
exchange ratios resulting from this analysis, as compared to the
exchange ratio of 0.4464x provided for in the Topco merger, were:
|
|
|
|
|
|
|
Exchange Ratio
|
|
|
ProLogis to AMB
|
|
|
|
|
Highest ProLogis equity value per share to lowest AMB equity
value per share
|
|
|
0.5047x
|
|
Lowest ProLogis equity value per share to highest AMB equity
value per share
|
|
|
0.3350x
|
|
Value
Creation Analysis
Intrinsic Value. J.P. Morgan prepared a value
creation analysis that compared the intrinsic equity value per
share of AMB common stock based on the dividend discount
analysis to the pro forma combined company equity value per
share. The pro forma combined company equity value per share was
equal to: (1) (a) the mid-point intrinsic equity value of
AMB, plus (b) the mid-point intrinsic equity value of
ProLogis, plus (c) the present value of expected synergies
calculated by discounting the expected cash flows from AMB
managements estimated $90 million of run-rate
synergies, comprised of an estimated $80 million of
run-rate G&A synergies plus an estimated $10 million
of run-rate non-G&A synergies, by a discount rate of 8.75%
based on the blended midpoint of discount rates utilized in the
dividend discount analyses for AMB and ProLogis, less
(d) an estimated $150 million of costs to achieve such
synergies and transaction-related expenses; divided by
(2) pro forma diluted shares of the combined company common
stock. There can be no assurance that the synergies, estimated
cost to achieve such synergies or estimated transaction-related
expenses will not be substantially greater or less than the AMB
management estimate described above. The value creation analysis
at the exchange ratio of 0.4464x provided for in the Topco
merger yielded accretion to the holders of AMB common stock of
4.0%.
Market Value. J.P. Morgan prepared a value
creation analysis that compared the closing share price of AMB
common stock on January 25, 2011 to the pro forma combined
company equity value per share for the Topco merger. The pro
forma combined company equity value per share was equal to: (1)
(a) the market equity value of AMB as of January 25,
2011, plus (b) the market equity value of ProLogis as of
January 25, 2011, plus (c) the value
50
of expected synergies calculated by applying a blended FFO
multiple of 23.8x to AMB managements estimate of
$90 million of run-rate synergies, comprised of an
estimated $80 million of run-rate G&A synergies plus
an estimated $10 million of run-rate non-G&A
synergies, less (d) an estimated $150 million of costs
to achieve such synergies and transaction-related expenses;
divided by (2) pro forma diluted shares of the combined
company common stock. There can be no assurance that the
synergies, estimated cost to achieve such synergies or estimated
transaction-related expenses will not be substantially greater
or less than the AMB management estimate described above. The
value creation analysis at the exchange ratio of 0.4464x
provided for in the Topco merger yielded accretion to the
holders of AMB common stock of 13.2%.
The foregoing summary of certain material financial analyses
does not purport to be a complete description of the analyses or
data presented by J.P. Morgan.
The preparation of a fairness opinion is a complex process and
is not necessarily susceptible to partial analysis or summary
description. J.P. Morgan believes that the foregoing
summary and its analyses must be considered as a whole and that
selecting portions of the foregoing summary and these analyses,
without considering all of its analyses as a whole, could create
an incomplete view of the processes underlying the analyses and
its opinion. In arriving at its opinion, J.P. Morgan did
not attribute any particular weight to any analyses or factors
considered by it and did not form an opinion as to whether any
individual analysis or factor (positive or negative), considered
in isolation, supported or failed to support its opinion.
Rather, J.P. Morgan considered the totality of the factors
and analyses performed in determining its opinion. Analyses
based upon forecasts of future results are inherently uncertain,
as they are subject to numerous factors or events beyond the
control of the parties and their advisors. Accordingly,
forecasts and analyses used or made by J.P. Morgan are not
necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by those
analyses. Moreover, J.P. Morgans analyses are not and
do not purport to be appraisals or otherwise reflective of the
prices at which businesses actually could be bought or sold.
As a part of its investment banking business, J.P. Morgan
and its affiliates are continually engaged in the valuation of
businesses and their securities in connection with mergers and
acquisitions, investments for passive and control purposes,
negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for
estate, corporate and other purposes. J.P. Morgan was
selected on the basis of such experience and its familiarity
with AMB to advise AMB in connection with the Merger and to
deliver a fairness opinion to the AMB board of directors
addressing only the fairness from a financial point of view of
the exchange ratio in the Topco merger to AMB as of the date of
such opinion.
For services rendered in connection with the Merger (including
the delivery of its opinion), AMB has agreed to pay
J.P. Morgan a fee of $20 million in the aggregate,
$2 million of which was payable upon the earlier of public
announcement of a transaction or delivery by J.P. Morgan of
its opinion and $18 million of which is contingent upon the
consummation of the Topco merger. In addition to the transaction
fee, AMB may, at its sole discretion, pay J.P. Morgan an
additional discretionary fee at closing of $2.5 million,
based on AMBs evaluation of the quality and quantity of
the work performed by J.P. Morgan in connection with services
rendered in connection with the Merger. In addition, AMB has
agreed to reimburse J.P. Morgan for its reasonable expenses
incurred in connection with its services, including the
reasonable fees and disbursements of counsel, and will indemnify
J.P. Morgan against certain liabilities, including
liabilities arising under the federal securities laws.
During the two years preceding the date of its opinion,
J.P. Morgan and its affiliates had commercial and
investment banking relationships with AMB and ProLogis, for
which J.P. Morgan and its affiliates received customary
compensation. J.P. Morgans services for AMB have
included: (1) acting as joint bookrunner for AMBs
offerings of common stock in April 2010 and March 2009,
respectively, (2) acting as joint bookrunner for AMBs
offering of debt securities in August 2010 and November 2010,
respectively, and (3) acting as dealer manager for
AMBs tender offers for certain of its outstanding debt
securities in May 2009 and December 2009, respectively. Such
services for ProLogis during such period have included:
(1) acting as joint bookrunner for ProLogis offering
of common shares in October 2010, (2) acting as joint
bookrunner for ProLogis offering of convertible notes in
March 2010, (3) acting as joint bookrunner for
ProLogis offering of debt securities in August 2009,
(4) acting as solicitation agent for ProLogis consent
solicitation with respect to certain of its debt securities in
September 2009, (5) acting as co-managing underwriter of
ProLogis offering of common shares in April 2009 and
(6) acting as
51
dealer manager for ProLogis tender offer for certain of
its outstanding debt securities in May 2009. Subsequent to the
delivery of J.P. Morgans opinion, (1) J.P.
Morgan was engaged to act as financial advisor to ProLogis in
connection with ProLogis acquisition of additional
ordinary units of PEPR and ProLogis tender offer for the
outstanding PEPR ordinary units and convertible preferred units
(as described under Summary Recent
Developments), for which J.P. Morgan will be paid a
fee in an amount to be determined, and (2) J.P. Morgan
Chase Bank, N.A., an affiliate of J.P. Morgan, entered into
a new Senior Bridge Loan Agreement with ProLogis pursuant to
which it is acting as lender to ProLogis in connection with such
transactions. In addition, J.P. Morgans commercial
banking affiliate is an agent bank and a lender under certain
outstanding credit facilities of AMB and one of its affiliates
and a lender to ProLogis, for which it receives customary
compensation or other financial benefits. In the ordinary course
of their businesses, J.P. Morgan and its affiliates may
actively trade the debt and equity securities of AMB or ProLogis
for their own account or for the accounts of customers and,
accordingly, they may at any time hold long or short positions
in such securities.
Opinion
of ProLogis Financial Advisor
In connection with the Merger, on January 30, 2011, Morgan
Stanley rendered its oral opinion to the ProLogis board of
trustees, subsequently confirmed in writing, to the effect that,
as of such date and based upon and subject to the assumptions,
procedures, factors, qualifications and limitations set forth
therein, the exchange ratio pursuant to the merger agreement was
fair, from a financial point of view, to the holders of ProLogis
common shares.
The full text of Morgan Stanleys fairness opinion,
dated January 30, 2011, is attached as Annex E to this
joint proxy statement/prospectus. You should read the opinion in
its entirety for a discussion of the assumptions made,
procedures followed, factors considered and limitations upon the
review undertaken by Morgan Stanley in rendering its opinion.
This summary is qualified in its entirety by reference to the
full text of such opinion. Morgan Stanleys opinion is
directed to the ProLogis board of trustees, addresses only the
fairness of the exchange ratio from a financial point of view to
the holders of ProLogis common shares, and does not address any
other aspect of the transaction. Morgan Stanleys opinion
did not in any manner address the prices at which the AMB common
stock will trade following consummation of the transaction or at
any time, and does not constitute a recommendation as to how any
shareholders of ProLogis or AMB stockholders should vote at any
stockholders meetings held in connection with the
transaction or whether to take any other action in connection
with the transaction.
In arriving at its opinion, Morgan Stanley, among other things:
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reviewed certain publicly available financial statements and
other business and financial information of ProLogis and AMB,
respectively;
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|
reviewed certain internal financial statements and other
operating data concerning ProLogis and AMB, respectively;
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|
reviewed certain financial projections prepared by the
managements of ProLogis and AMB, respectively;
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|
reviewed information relating to certain strategic, financial
and operational benefits anticipated from the transaction,
prepared by the managements of ProLogis and AMB, respectively;
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|
discussed the past and current operations and financial
condition and the prospects of ProLogis, including information
relating to certain strategic, financial and operational
benefits anticipated from the transaction, with senior
executives of ProLogis;
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|
discussed the past and current operations and financial
condition and the prospects of AMB, including information
relating to certain strategic, financial and operational
benefits anticipated from the transaction, with senior
executives of AMB;
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reviewed the pro forma impact of the transaction on AMBs
FFO per share, cash flow, consolidated capitalization and
financial ratios;
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|
reviewed the reported prices and trading activity for the
ProLogis common shares and the AMB common stock;
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52
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compared the financial performance of ProLogis and AMB and the
prices and trading activity of the ProLogis common shares and
the AMB common stock with that of certain other publicly-traded
companies comparable with ProLogis and AMB, respectively, and
their securities;
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reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
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participated in discussions and negotiations among
representatives of ProLogis and AMB and certain parties and
their financial and legal advisors;
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reviewed the merger agreement and certain related
documents; and
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performed such other analyses and considered such other factors
as Morgan Stanley deemed appropriate.
|
In arriving at its opinion, Morgan Stanley assumed and relied
upon, without independent verification, the accuracy and
completeness of the information that was publicly available or
supplied or otherwise made available to Morgan Stanley by
ProLogis and AMB, and formed a substantial basis for its
opinion. With respect to the financial projections, including
information relating to certain strategic, financial and
operational benefits anticipated from the transaction, Morgan
Stanley assumed that they had been reasonably prepared on bases
reflecting the best currently available estimates and judgments
of the respective managements of ProLogis and AMB of the future
financial performance of ProLogis and AMB. In addition, Morgan
Stanley assumed that the Merger, the contribution and the
issuance of AMB LP partnership units will each be consummated in
accordance with the terms set forth in the merger agreement
without any waiver, amendment or delay of any terms or
conditions, including, among other things, that the ProLogis
merger and the Topco merger will each be treated as tax-free
reorganizations pursuant to the Code. Morgan Stanley assumed
that, in connection with the receipt of all the necessary
governmental, regulatory or other approvals and consents
required for the proposed transaction, no delays, limitations,
conditions or restrictions will be imposed that would have a
material adverse effect on the contemplated benefits expected to
be derived in the proposed transaction. Morgan Stanley is not a
legal, tax or regulatory advisor. Morgan Stanley is a
financial advisor only and relied upon, without independent
verification, the assessment of ProLogis and AMB and their
respective legal, tax or regulatory advisors with respect to
legal, tax or regulatory matters. Morgan Stanley expressed no
opinion with respect to the fairness of the amount or nature of
the compensation to any of ProLogis officers, trustees or
employees, or any class of such persons, relative to the
consideration to be received by the holders of ProLogis common
shares in the transaction. Morgan Stanley also expressed no
opinion as to the relative fairness of any portion of the merger
consideration to holders of any series of common or preferred
shares of ProLogis. Morgan Stanley did not make any independent
valuation or appraisal of the assets or liabilities of ProLogis
or AMB, nor was Morgan Stanley furnished with any such
appraisals. Morgan Stanleys opinion was necessarily based
on financial, economic, market and other conditions as in effect
on, and the information made available to Morgan Stanley as of,
the date of its opinion. Events occurring after the date of
Morgan Stanleys opinion may affect its opinion and the
assumptions used in preparing it, and Morgan Stanley did not
assume any obligation to update, revise or reaffirm its opinion.
The following is a brief summary of the material analyses
performed by Morgan Stanley in connection with its oral opinion
and the preparation of its written opinion dated
January 30, 2011. Although each analysis was provided to
the ProLogis board of trustees, in connection with arriving at
its opinion, Morgan Stanley considered all of its analysis as a
whole and did not attribute any particular weight to any
analysis described below. This summary of financial analyses
includes information presented in tabular format. In order to
fully understand the financial analyses used by Morgan Stanley,
the tables must be read together with the text of each summary.
The tables alone do not constitute a complete description of the
financial analyses. The analyses listed in the tables and
described below must be considered as a whole; considering any
portion of such analyses and of the factors considered, without
considering all analyses and factors, could create a misleading
or incomplete view of the process underlying Morgan
Stanleys fairness opinion.
Relative
Valuation and Leverage
Morgan Stanley reviewed the implied relative valuation metrics
of ProLogis and AMB based on each companys closing price
as of January 26, 2011, the last trading day before
ProLogis common share and AMB common stock prices may have been
affected by market speculation regarding a potential transaction
involving the
53
companies and each companys internal forecasts. Morgan
Stanley observed that ProLogis and AMBs valuation
multiples were similar based on a variety of metrics. The
metrics observed included each companys January 26,
2011 closing price divided by managements forecast of 2011
and 2012 FFO and adjusted FFO. Morgan Stanley also evaluated
each companys aggregate value divided by managements
forecast of 2011 EBITDA.
Morgan Stanley observed that ProLogis and AMBs relative
valuations were generally similar, and in particular when
evaluating FFO and EBITDA multiples. Morgan Stanley also
observed the relative leverage of both ProLogis and AMB as
evidenced by each companys debt to total capitalization
and debt to estimated 2011 EBITDA. Morgan Stanley noted that AMB
was less levered relative to ProLogis based on the leverage
metrics evaluated. In addition, Morgan Stanley observed each
companys credit ratings from third party ratings agencies
(Moodys, S&P, and Fitch Ratings). Morgan Stanley
observed that Moodys, S&P, and Fitch each had a
higher senior unsecured credit rating assigned to AMB than
ProLogis.
The following tables list the valuation and leverage metrics, as
well as the third party credit ratings observed by Morgan
Stanley:
Relative
Valuation and Leverage Statistics Financial Figures
Based on Management Forecasts
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AMB
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ProLogis
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2011E
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2012E
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2011E
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2012E
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Price / FFO
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24.0x
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21.6x
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23.5x
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20.2x
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Price / AFFO
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30.0x
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23.5x
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24.9x
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22.5x
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Aggregate Value/2011 EBITDA
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21.0x
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20.4x
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AMB
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ProLogis
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Debt / 2011 EBITDA
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8.6
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x
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9.4
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x
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Debt / Total Capitalization
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41.5
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%
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50.3
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%
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Moodys Senior Unsecured Credit Rating
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Baa1
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Baa2
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S&P Senior Unsecured Credit Rating
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BBB
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BBB
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−
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Fitch Senior Unsecured Credit Rating
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BBB
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BB+
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Historical
Exchange Ratio Analysis
Morgan Stanley reviewed the stock price performance and trading
volumes of ProLogis and AMB (i) during various periods
ending on January 28, 2011, the last full trading day prior
to the rendering of Morgan Stanleys opinion dated
January 30, 2011, (ii) on January 28, 2011 and
(iii) on January 26, 2011 (the last trading day before
ProLogis common share and AMB common stock prices may have been
affected by market speculation regarding a potential transaction
involving the companies).
Morgan Stanley then calculated historical exchange ratios on
certain dates and during certain periods between August 1,
2010 (180 days prior to January 28, 2011) and
January 28, 2011 implied by dividing the AMB closing price
for the relevant date, or the average AMB closing price for the
relevant period, as the case may be, by the ProLogis closing
price for such date, or the ProLogis average price for such
period, as the case may be. Morgan
54
Stanley next compared the exchange ratio of 0.4464x provided for
in the merger agreement with historical exchange ratios for such
dates and periods. The following table lists the implied
exchange ratios for these dates and periods:
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Implied Exchange
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Ratios
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Closing Price on January 26, 2011
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0.447x
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Closing Price on January 28, 2011
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0.462x
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15-Day
Average Closing Price
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0.445x
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30-Day
Average Closing Price
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0.448x
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60-Day
Average Closing Price
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0.447x
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90-Day
Average Closing Price
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0.452x
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180-Day
Average Closing Price
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0.449x
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Low / High Closing Price for Trading Week Between
January 14, 2011 through January 21, 2011
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0.428x/0.452x
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Low / High Price for
30-Day
Period (since December 29, 2010)
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0.427x/0.467x
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Research
Analyst Price Targets and Net Asset Value Analysis
Morgan Stanley reviewed public market trading price targets for
ProLogis common shares and AMB common stock prepared and
published by fourteen available equity research analysts that
provided targets for both ProLogis and AMB prior to
January 26, 2011 as well as price targets from additional
equity research analysts that provided targets for either
ProLogis or AMB. Morgan Stanley reviewed the most recent price
target published by each analyst prior to such date. These
targets reflect each analysts estimate of the future
public market trading price of ProLogis or AMB common stock, as
applicable, at the time the price target was published.
Morgan Stanley calculated the exchange ratio implied by each
analysts price targets for ProLogis and AMB by dividing
the ProLogis price target by the AMB price target. With respect
to the 14 available equity research analysts that provided price
targets for both ProLogis and AMB, Morgan Stanleys
analysis implied a range of exchange ratios of 0.433x to 0.500x
based on such price targets (when excluding the two highest and
two lowest implied ratios) and a range of exchange ratios of
0.385x to 0.593x (when including all 14 available data points).
The average exchange ratio was 0.471x when considering all 14
available equity data points. With respect to the consensus
price targets of each company, Morgan Stanleys analysis
implied an average exchange ratio of 0.467x. The consensus price
target is available on Bloomberg and incorporates all analysts
reporting price targets to
55
Bloomberg. Morgan Stanley noted that the merger agreement
provided for an exchange ratio of 0.4464x. The table below
outlines the price targets used by Morgan Stanley:
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PLD
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AMB
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Ex. Ratio
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Barclays Capital
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$
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14.00
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$
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31.00
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0.452
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BofA Merrill Lynch
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$
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16.00
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$
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34.00
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0.471
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Citi
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$
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14.00
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$
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28.00
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0.500
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Deutsche Bank
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$
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15.00
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$
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29.00
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0.517
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*
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FBR Capital Markets
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$
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16.50
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$
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35.00
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0.471
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Gleacher & Company
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$
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10.00
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$
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26.00
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0.385
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*
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Goldman Sachs & Co.
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$
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12.00
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$
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30.00
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0.400
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*
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ISI Group
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$
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13.00
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$
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28.00
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0.464
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Jefferies & Co.
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$
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13.00
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$
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28.00
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0.464
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JPMorgan
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$
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15.00
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$
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30.00
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0.500
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Macquarie Research
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$
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13.00
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$
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30.00
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0.433
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RBC Capital Markets
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$
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16.00
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$
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27.00
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0.593
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*
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Stifel Nicolaus
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$
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16.00
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$
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34.50
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0.464
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UBS (US)
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$
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13.00
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$
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27.25
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0.477
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Average
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0.471
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Consensus
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$
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13.99
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$
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29.98
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0.467
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* |
|
Exchange ratios excluded in calculating implied range. |
Morgan Stanley also reviewed equity research analyst estimates
of net asset value per share for each of ProLogis and AMB.
Morgan Stanley reviewed the most recent estimates of net asset
value published by analysts prior to January 26, 2011. With
respect to the estimates of net asset value by Green Street
analysts, who have a reputation for having REIT expertise,
Morgan Stanleys analysis implied an exchange ratio of
0.446x (using Green Street net asset value estimates of $12.50
and $28.00 for ProLogis and AMB, respectively) and with respect
to the estimates of net asset value by consensus analysts,
Morgan Stanleys analysis implied an average exchange ratio
of 0.480x using consensus net asset values of $13.42 (an average
of 7 data points) and $27.95 (an average of 8 data points) for
ProLogis and AMB, respectively. The consensus net asset values
are available from SNL Financial and incorporate all analysts
reporting net asset value estimates to SNL Financial. Morgan
Stanley noted that the merger agreement provided for an exchange
ratio of 0.4464x.
The public market trading price targets and estimates of net
asset value per share published by securities research analysts
do not necessarily reflect current market trading prices for
ProLogis common shares and shares of AMB common stock and these
targets and estimates are subject to uncertainties, including
the future financial performance of ProLogis and AMB and future
financial market conditions.
Discounted
Cash Flow Analysis
Morgan Stanley performed a discounted cash flow analysis, which
is designed to provide an implied value of a company by
calculating the present value of the estimated future cash flows
and terminal value of the company. Morgan Stanley calculated
ranges of implied equity values per share for each of ProLogis
and AMB, based on estimates of future cash flows for calendar
years 2011 through 2015 prepared by the management of each of
ProLogis and AMB, respectively.
In arriving at the estimated equity values per ProLogis common
share, Morgan Stanley noted the estimated consolidated net
operating income for calendar years 2011 through 2015 and then
calculated the terminal value by (i) applying a range of
terminal capitalization rates ranging from 6.60% to 6.80% with
respect to ProLogis real estate assets, (ii) applying
a range of capitalization rates ranging from 7.10% to 7.30% with
respect to net operating income from the real estate portion of
ProLogis investment management business and
(iii) applying a terminal multiple of 11.0x with respect to
the operating income from management fees associated with
ProLogis investment
56
management business. The capitalization rates used by Morgan
Stanley (i) with respect to ProLogis real estate
assets were based on Green Streets implied market
capitalization rate based on the price per share of each of
ProLogis and AMB on January 26, 2011 (the last trading day
before ProLogis common share and AMB common stock prices may
have been affected by market speculation regarding a potential
transaction involving the companies) and (ii) with respect
to the real estate portion of ProLogis investment
management business, was 50 basis points higher than the
capitalization rate used with respect to ProLogis real
estate assets. The terminal multiple used by Morgan Stanley with
respect to ProLogis investment management business was the
midpoint of ProLogis range of net cash flow multiples used
to value the investment management businesses in ProLogis
2010 net asset value analysis. The consolidated net
operating income and the terminal value were then discounted to
present values using a range of discount rates from 8.3% to
8.8%. The discount rates used by Morgan Stanley were based on
the weighted average cost of capital for ProLogis. The cost of
equity, a contributor to the weighted average cost of capital,
was analyzed using the capital asset pricing model, which is
impacted by the relative historical volatility of ProLogis
share price. Morgan Stanley did not, as a part of its analysis,
undertake a separate valuation of the assets or operations of
PEPR, ProLogis proportionate share thereof, or the income
ProLogis otherwise derives from PEPR. Nor were the cash flows
attributable to PEPR accorded differential treatment in Morgan
Stanleys analysis. Based on the calculations set forth
above, this analysis implied a range for ProLogis common shares
of approximately $13.49 to $14.69 per share.
In arriving at the estimated equity values per share of AMB
common stock, Morgan Stanley noted the estimated consolidated
net operating income for calendar years 2011 through 2015 and
then calculated the terminal value by (i) applying a range
of terminal capitalization rates ranging from 6.10% to 6.30%
with respect to AMBs real estate assets,
(ii) applying a range of capitalization rates ranging from
6.60% to 6.80% with respect to net operating income from the
real estate portion of AMBs investment management business
and (iii) applying a terminal multiple of 11.0x with
respect to the operating income from management fees associated
with AMBs investment management business. The
capitalization rates used by Morgan Stanley (i) with
respect to AMBs real estate assets were based on Green
Streets implied market capitalization rate based on the
price per share of each of ProLogis and AMB on January 26,
2011 (the last trading day before ProLogis common share and AMB
common stock prices may have been affected by market speculation
regarding a potential transaction involving the companies) and
(ii) with respect to the real estate portion of AMBs
investment management business, was 50 basis points higher
than the capitalization rate used with respect to AMBs
real estate assets. The terminal multiple used by Morgan Stanley
with respect to AMBs investment management business was
the midpoint of AMBs range of net cash flow multiples used
to value the investment management businesses in AMBs
2010 net asset value analysis. The consolidated net
operating income and the terminal value were then discounted to
present values using a range of discount rates from 7.7% to
8.2%. The discount rates used by Morgan Stanley were based on
the weighted average cost of capital for AMB. The cost of
equity, a contributor to the weighted average cost of capital,
was analyzed using the capital asset pricing model, which is
impacted by the relative historical volatility of AMBs
share price. Based on the calculations set forth above, this
analysis implied a range for AMB common shares of approximately
$33.65 to $36.95 per share.
Morgan Stanley noted that the discounted cash flow analysis of
each of ProLogis and AMB indicated a range of implied exchange
ratios of 0.365x to 0.437x, compared to an exchange ratio of
0.4464x provided for in the merger agreement. Morgan Stanley
further noted that, using an 8.25% discount rate (which is the
approximate midpoint of a shared discount rate), the discounted
cash flow analysis of each of ProLogis and AMB indicated a range
of implied exchange ratios of 0.385x to 0.461x, compared to an
exchange ratio of 0.4464x provided for in the merger agreement.
Contribution
Analysis
Morgan Stanley also performed a contribution analysis which
reviewed the pro forma contribution of each of ProLogis and AMB
to the combined entity and implied contributions based on
certain operational and financial metrics using management plans
for both ProLogis and AMB. Such operational and financial
metrics included consolidated net operating income (which
includes no contributions from unconsolidated joint venture
properties), consolidated EBITDA (which includes cash
distributions from unconsolidated entities), look through EBITDA
(which includes the pro-rata share of EBITDA from unconsolidated
entities), consensus EBITDA, consolidated
57
FFO, consensus FFO, Green Street net asset value estimates and
consensus net asset value estimates. Based on the relative
contributions of each company for the unlevered income
estimates, Morgan Stanley derived an implied equity contribution
for each company by multiplying the cumulative total enterprise
value of the two standalone companies by the respective
contribution percentages and subtracting net debt attributable
to each standalone company. Morgan Stanley also noted the
implied exchange ratio derived from the implied equity
contributions across the selected metrics. For the unlevered and
levered income estimates, Morgan Stanley held the ProLogis share
price constant at the closing price on January 26, 2011
when calculating the implied exchange ratio.
The computations resulted in the following implied equity
contributions and implied exchange ratios:
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|
|
|
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|
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|
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|
|
|
|
|
|
|
|
Implied
|
|
|
|
|
|
|
|
|
|
Exchange
|
|
Equity Contribution Analysis
|
|
ProLogis
|
|
|
AMB
|
|
|
Ratio
|
|
|
2011 Unlevered Income Estimates
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Net Operating Income
|
|
|
58
|
%
|
|
|
42
|
%
|
|
|
0.429x
|
|
Consolidated EBITDA
|
|
|
61
|
%
|
|
|
39
|
%
|
|
|
0.462x
|
|
Look Through EBITDA
|
|
|
63
|
%
|
|
|
37
|
%
|
|
|
0.492x
|
|
Mean Consensus EBITDA
|
|
|
60
|
%
|
|
|
40
|
%
|
|
|
0.452x
|
|
Levered Income Estimates
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 Consolidated FFO
|
|
|
60
|
%
|
|
|
40
|
%
|
|
|
0.451x
|
|
2011 Consensus FFO
|
|
|
62
|
%
|
|
|
38
|
%
|
|
|
0.476x
|
|
Net Asset Value Estimates
|
|
|
|
|
|
|
|
|
|
|
|
|
Green Street NAV Estimates
|
|
|
60
|
%
|
|
|
40
|
%
|
|
|
0.446x
|
|
Mean Consensus NAV Estimates
|
|
|
61
|
%
|
|
|
39
|
%
|
|
|
0.480x
|
|
Market Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing Price on January 26, 2011
|
|
|
60
|
%
|
|
|
40
|
%
|
|
|
0.447x
|
|
Closing Price on January 28, 2011
|
|
|
60
|
%
|
|
|
40
|
%
|
|
|
0.462x
|
|
Morgan Stanley noted that the 0.4464 exchange ratio of ProLogis
common shares to AMB common stock provided for in the merger
agreement would result in pro forma ownership of the combined
company for holders of ProLogis common shares equal to
approximately 60%.
Pro
Forma Accretion/Dilution Analysis
Using financial projections and estimates of cost savings
resulting from the transaction provided by the managements of
ProLogis and AMB, Morgan Stanley calculated the
accretion/dilution of the FFO per ProLogis common share and the
FFO per share of AMB common stock as a result of the
transaction. For the year ended December 31, 2012, Morgan
Stanley compared the FFO per share of the pro forma entity to
the FFO per share estimate of ProLogis and AMB, each as a
standalone entity. The analysis indicated that the transaction
would be accretive to the FFO per share of each of ProLogis and
AMB for calendar year 2012. The accretion to AMB in 2012 is
greater on both an absolute and a relative basis when compared
to the accretion to ProLogis in 2012 principally due to the
underlying assumed growth of FFO per share between 2011 and 2012
for each of the companies. Though the management projections
show greater FFO per share growth during this period for
ProLogis as compared to AMB, the compound aggregate growth rate
for each of AMB and ProLogis is substantially the same over the
five-year projection period, which suggests that FFO accretion
will be more evenly shared over the longer term. Morgan Stanley
evaluated accretion to ProLogis and AMB core FFO. Core FFO is
defined as FFO excluding significant non-cash items and
non-recurring items, as well as gains or losses from sales of
real estate.
In performing its analysis, Morgan Stanley made numerous
assumptions with respect to industry performance, general
business and economic conditions and other matters, many of
which are beyond the control of ProLogis or AMB. Any estimates
contained in Morgan Stanleys analysis are not necessarily
indicative of future results or actual values, which may be
significantly more or less favorable than those suggested by the
estimates. These analyses were prepared solely as part of the
analysis of Morgan Stanley of the fairness of the exchange ratio
pursuant to the
58
merger agreement from a financial point of view to the holders
of ProLogis common shares and were conducted in connection with
the delivery of Morgan Stanleys opinion to ProLogis
board of trustees.
General
In connection with the review of the transaction by the ProLogis
board of trustees, Morgan Stanley performed a variety of
financial and comparative analyses for purposes of rendering its
opinion. The preparation of a financial opinion is a complex
process and is not necessarily susceptible to a partial analysis
or summary description. In arriving at its opinion, Morgan
Stanley considered the results of all of its analyses as a whole
and did not attribute any particular weight to any analysis or
factor it considered. Morgan Stanley believes that selecting any
portion of its analyses, without considering all analyses as a
whole, would create an incomplete view of the process underlying
its analyses and opinion. In addition, Morgan Stanley may have
given various analyses and factors more or less weight than
other analyses and factors, and may have deemed various
assumptions more or less probable than other assumptions. As a
result, the ranges of valuations resulting from any particular
analysis described above should not be taken to be Morgan
Stanleys view of the actual value of ProLogis or AMB. In
performing its analyses, Morgan Stanley made assumptions
with respect to industry performance, general business and
economic conditions and other matters. Many of these assumptions
relate to factors that are beyond the control of ProLogis or
AMB. Any estimates contained in Morgan Stanleys analyses
are not necessarily indicative of future results or actual
values, which may be significantly more or less favorable than
those suggested by such estimates.
Morgan Stanley conducted the analyses described above solely as
part of its analysis of the fairness of the exchange ratio
pursuant to the merger agreement from a financial point of view
to the holders of ProLogis common shares and in connection with
the delivery of its opinion to the ProLogis board of trustees.
These analyses do not purport to be appraisals or to reflect the
prices at which ProLogis common shares or AMB common stock might
actually trade.
The exchange ratio was determined through arms-length
negotiations between ProLogis and AMB and was approved by the
ProLogis board of trustees. Morgan Stanley provided advice to
ProLogis during these negotiations. Morgan Stanley did not,
however, recommend any specific exchange ratio to ProLogis or
that any specific exchange ratio constituted the only
appropriate merger consideration for the transaction. In
addition, Morgan Stanleys opinion did not in any manner
address the prices at which the AMB common stock will trade at
any time, and Morgan Stanley expressed no opinion or
recommendation as to how shareholders of ProLogis or
stockholders of AMB should vote at the stockholders
meetings to be held in connection with the transaction.
Morgan Stanleys opinion and its presentation to the
ProLogis board of trustees was one of many factors taken into
consideration by the ProLogis board of trustees in deciding to
approve the merger agreement. Consequently, the analyses as
described above should not be viewed as determinative of the
view of the ProLogis board of trustees with respect to the
exchange ratio or of whether the ProLogis board of trustees
would have been willing to agree to a different exchange ratio.
Morgan Stanleys opinion was approved by a committee of
Morgan Stanley investment banking and other professionals in
accordance with its customary practice.
Morgan Stanley is a global financial services firm engaged in
the securities, investment management and individual wealth
management businesses. Morgan Stanleys securities business
is engaged in securities underwriting, trading and brokerage
activities, foreign exchange, commodities and derivatives
trading, prime brokerage, as well as providing investment
banking, financing and financial advisory services. Morgan
Stanley, its affiliates, directors and officers may at any time
invest on a principal basis or manage funds that invest, hold
long or short positions, finance positions, and may trade or
otherwise structure and effect transactions, for their own
account or the accounts of its customers, in debt or equity
securities or loans of ProLogis, AMB, or any other company, or
any currency or commodity, that may be involved in the
transaction, or any related derivative instrument.
ProLogis retained Morgan Stanley to act as its exclusive
financial advisor in connection with the transaction because of
its qualifications, expertise and reputation. As compensation
for its services, which included advisory services as well as
the rendering of a fairness opinion, ProLogis has agreed to pay
Morgan Stanley a fee of $20 million in the aggregate,
$2 million of which was payable upon execution of the
merger agreement and $18 million of which is contingent
upon the consummation of the transaction. In addition to the
transaction fee, ProLogis may, at its sole discretion, pay
Morgan Stanley an additional discretionary fee at closing of
$2.5 million, based on ProLogis evaluation of the
quality and quantity of the work performed by Morgan Stanley in
connection with services rendered
59
in connection with the transaction. ProLogis has also agreed to
reimburse Morgan Stanley for its expenses incurred in performing
its services. In addition, ProLogis has agreed to indemnify
Morgan Stanley and its affiliates, their respective directors,
officers, agents and employees and each person, if any,
controlling Morgan Stanley or any of its affiliates against
certain liabilities and expenses, including certain liabilities
under the federal securities laws, related to or arising out of
Morgan Stanleys engagement. During the two years preceding
the date of its opinion, Morgan Stanley and its affiliates had
commercial and investment banking relationships with ProLogis
and AMB, for which Morgan Stanley and its affiliates received
customary compensation. Morgan Stanleys services for
ProLogis have included: (1) acting as joint bookrunner for
ProLogis offerings of common shares in April 2009 and
October 2010, respectively, (2) acting as joint bookrunner
for ProLogis offering of debt securities in August 2009,
(3) acting as joint bookrunner for ProLogis offering
of convertible notes in March 2010, (4) acting as dealer
manager for ProLogis tender offer for certain of its
outstanding debt securities in May 2009, (5) acting as a
manager for ProLogis continuous equity offering program
established in March 2010, (6) acting as financial advisor
to ProLogis on the sale of its Japan and China portfolios in
February 2009, (7) acting as a financial advisor to PEPR, in
connection with an asset sale in May 2009 and (8) acting as
sole bookrunner for PEPRs offering of convertible
preferred units in December 2009. Morgan Stanleys services
for AMB during such period have included: (1) acting as
joint bookrunner for AMBs offerings of common stock in
March 2009 and April 2010, respectively, (2) acting as
joint bookrunner for AMBs offerings of debt securities in
November 2009, August 2010 and November 2010, respectively,
(3) acting as dealer manager for AMBs tender offer
for certain of its outstanding debt securities in December 2009
and (4) acting as a financial advisor to AMB in connection with
the formation of a joint venture in China in March 2011. In
addition, Morgan Stanleys commercial banking affiliate is
a lender under certain outstanding credit facilities of AMB,
ProLogis and PEPR. Morgan Stanley may also seek to provide such
services to AMB and ProLogis in the future and expects to
receive fees for the rendering of these services.
AMB
Unaudited Prospective Financial Information
AMB does not as a matter of course make public long-term
projections as to future revenues, earnings or other results due
to, among other reasons, the uncertainty of the underlying
assumptions and estimates. However, AMB is including this
unaudited prospective financial information that was made
available to the AMB board of directors, the ProLogis board of
trustees, J.P. Morgan and Morgan Stanley in connection with
the evaluation of the Merger. The inclusion of this information
should not be regarded as an indication that any of AMB,
ProLogis, J.P. Morgan, Morgan Stanley or any other
recipient of this information considered, or now considers, it
to be necessarily predictive of actual future results.
The unaudited prospective financial information was, in general,
prepared solely for internal use and is subjective in many
respects. As a result, there can be no assurance that the
prospective results will be realized or that actual results will
not be significantly higher or lower than estimated. Since the
unaudited prospective financial information covers multiple
years, such information by its nature becomes less predictive
with each successive year. AMB stockholders and ProLogis
shareholders are urged to review AMBs SEC filings for a
description of risk factors with respect to AMBs business.
See Cautionary Statement Regarding Forward-Looking
Statements and Where You Can Find More
Information. The unaudited prospective financial
information was not prepared with a view toward public
disclosure, nor was it prepared with a view toward compliance
with GAAP, published guidelines of the SEC or the guidelines
established by the American Institute of Certified Public
Accountants for preparation and presentation of prospective
financial information. In addition, the unaudited prospective
financial information requires significant estimates and
assumptions that make it inherently less comparable to the
similarly titled GAAP measures in AMBs historical GAAP
financial statements. Neither AMBs independent registered
public accounting firm, nor any other independent accountants,
have compiled, examined or performed any procedures with respect
to the unaudited prospective financial information contained
herein, nor have they expressed any opinion or any other form of
assurance on such information or its achievability. The report
of AMBs independent registered public accounting firm
contained in AMBs Annual Report on
Form 10-K
for the year ended December 31, 2010, which is incorporated
by reference into this joint proxy statement/prospectus, relates
to AMBs historical financial information. It does not
extend to the unaudited prospective financial information and
should not be read to do so. Furthermore, the unaudited
prospective financial information does not take into account any
circumstances or events occurring after the date it was prepared.
60
The following table presents selected unaudited prospective
financial data for the fiscal years ending 2011 through 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
($ in millions)
|
|
|
EBITDA
|
|
$
|
468
|
|
|
$
|
529
|
|
|
$
|
603
|
|
|
$
|
692
|
|
|
$
|
800
|
|
Core funds from operations (Core FFO)
|
|
$
|
238
|
|
|
$
|
264
|
|
|
$
|
289
|
|
|
$
|
364
|
|
|
$
|
454
|
|
Adjusted funds from operations (AFFO)
|
|
$
|
189
|
|
|
$
|
237
|
|
|
$
|
256
|
|
|
$
|
341
|
|
|
$
|
429
|
|
For purposes of the unaudited prospective financial information
provided to J.P. Morgan and Morgan Stanley and presented
herein, EBITDA is calculated as net earnings before gains plus
(i) preferred unit distributions, (ii) depreciation
and amortization, (iii) non-cash cost of stock-based
compensation awards, (iv) consolidated interest expense,
(v) income tax expense, (vi) certain other non-cash
charges, and (vii) AMBs pro rata share of EBITDA from
unconsolidated joint ventures; less non-controlling interest
holders share of EBITDA from consolidated joint ventures.
For purposes of the unaudited prospective financial information
provided to J.P. Morgan and Morgan Stanley and presented
herein, Core funds from operations (Core FFO) is
calculated as operating income less interest expense, preferred
share dividends, and other reconciling line items, adjusted for
certain non-cash items, non-recurring items, and gains. For
purposes of the unaudited prospective financial information
provided to J.P. Morgan and Morgan Stanley and presented
herein, Adjusted funds from operations (AFFO) is
calculated as Core FFO less (i) recurring capital
expenditures and (ii) pro rata share of straight line rent
adjustments (FAS 13); plus (i) amortized deferred
financing costs and (ii) non-cash cost of stock-based
compensation awards.
In addition to the summary metrics presented above, AMB also
provided a 2011 estimate of net operating income of $442
million. For purposes of the unaudited prospective financial
information provided to J.P. Morgan and Morgan Stanley and
presented herein, net operating income represents consolidated
rental revenues less consolidated property operating expenses.
In addition to the summary metrics presented above, AMB also
provided an estimate of gross dividends per year for each year
between 2011 through 2015. The estimate provided by AMB for each
of 2011, 2012, 2013, 2014 and 2015 was $193 million,
$213 million, $235 million, $271 million and
$309 million, respectively.
ProLogis and AMB calculate certain non-GAAP financial metrics
including EBITDA, AFFO and NOI using different methodologies.
The differences relate to the following categories: (i)
treatment of each companys share of income and cash flow
from joint ventures and other unconsolidated investments (ii)
treatment of minority interest share of consolidated income and
cash flow; and (iii) definitional differences related to certain
adjustments made to calculate AFFO. AMB has made conforming
methodology changes to the financial data received from
ProLogis. Consequently, the financial metrics presented in each
companys prospective financial information disclosures and
in the sections of this joint proxy statement/prospectus with
respect to the opinions of the financial advisors to AMB and
ProLogis may not be directly comparable to one another.
In preparing the foregoing unaudited projected financial
information, AMB made a number of assumptions regarding, among
other things, interest rates, corporate financing activities,
including amount and timing of the issuance of senior and
secured debt, AMB common stock price appreciation and the timing
and amount of common stock issuances, annual dividend levels,
occupancy and customer retention levels of its owned and managed
portfolios, changes in rent, the amount, timing and cost of
existing and planned developments, lease-up rates of existing
and planned developments, the amount and timing of asset sales
and asset acquisitions, including the return on such
acquisitions, the formation of, and expected terms of, including
yield on, future fund formations, the amount of income taxes
paid, and the amount of general and administrative costs.
No assurances can be given that the assumptions made in
preparing the above unaudited prospective financial information
will accurately reflect future conditions. The estimates and
assumptions underlying the unaudited prospective financial
information involve judgments with respect to, among other
things, future economic, competitive, regulatory and financial
market conditions and future business decisions which may not be
realized and that are inherently subject to significant
business, economic, competitive and regulatory uncertainties and
contingencies, including, among others, risks and uncertainties
described under Risk Factors and Cautionary
Statement Regarding Forward-Looking Statements, all of
which are difficult to predict and many of which are beyond the
control of AMB and/or ProLogis and will be beyond the control of
the combined company. There can be
61
no assurance that the underlying assumptions will prove to be
accurate or that the projected results will be realized, and
actual results likely will differ, and may differ materially,
from those reflected in the unaudited prospective financial
information, whether or not the Merger is completed.
In addition, although presented with numerical specificity, the
above unaudited prospective financial information reflects
numerous assumptions and estimates as to future events made by
AMB management that AMB management believed were reasonable at
the time the unaudited prospective financial information was
prepared. The above unaudited prospective financial information
does not give effect to the Merger. AMB stockholders and
ProLogis shareholders are urged to review AMBs most recent
SEC filings for a description of AMBs reported and
anticipated results of operations and financial condition and
capital resources during 2010, including Managements
Discussion and Analysis of Financial Condition and Results of
Operations in AMBs Annual Report on
Form 10-K
for the year ended December 31, 2010, which is incorporated
by reference into this joint proxy statement/prospectus.
Readers of this joint proxy statement/prospectus are cautioned
not to place undue reliance on the unaudited prospective
financial information set forth above. No representation is made
by AMB, ProLogis or any other person to any AMB stockholder or
any ProLogis shareholder regarding the ultimate performance of
AMB compared to the information included in the above unaudited
prospective financial information. The inclusion of unaudited
prospective financial information in this joint proxy
statement/prospectus should not be regarded as an indication
that such prospective financial information will be an accurate
prediction of future events, and such information should not be
relied on as such.
AMB DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE ABOVE
UNAUDITED PROSPECTIVE FINANCIAL INFORMATION TO REFLECT
CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT
THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR
ALL OF THE ASSUMPTIONS UNDERLYING SUCH PROSPECTIVE FINANCIAL
INFORMATION ARE NO LONGER APPROPRIATE, EXCEPT AS MAY BE REQUIRED
BY LAW.
ProLogis
Unaudited Prospective Financial Information
ProLogis does not as a matter of course make public long-term
projections as to future revenues, earnings or other results due
to, among other reasons, the uncertainty of the underlying
assumptions and estimates. However, ProLogis is including this
unaudited prospective financial information that was made
available to the ProLogis board of trustees, the AMB board of
directors, J.P. Morgan and Morgan Stanley in connection
with the evaluation of the Merger. The inclusion of this
information should not be regarded as an indication that any of
ProLogis, AMB, J.P. Morgan, Morgan Stanley or any other
recipient of this information considered, or now considers, it
to be necessarily predictive of actual future results.
The unaudited prospective financial information was, in general,
prepared solely for internal use and is subjective in many
respects. As a result, there can be no assurance that the
prospective results will be realized or that actual results will
not be significantly higher or lower than estimated. Since the
unaudited prospective financial information covers multiple
years, such information by its nature becomes less predictive
with each successive year. AMB stockholders and ProLogis
shareholders are urged to review the SEC filings of ProLogis for
a description of risk factors with respect to the business of
ProLogis. See Cautionary Statement Regarding
Forward-Looking Statements and Where You Can Find
More Information. The unaudited prospective financial
information was not prepared with a view toward public
disclosure, nor was it prepared with a view toward compliance
with published guidelines of the SEC, the guidelines established
by the American Institute of Certified Public Accountants for
preparation and presentation of prospective financial
information, or GAAP. Neither the independent registered public
accounting firm of ProLogis, nor any other independent
accountants, have compiled, examined, or performed any
procedures with respect to the unaudited prospective financial
information contained herein, nor have they expressed any
opinion or any other form of assurance on such information or
its achievability. The report of the independent registered
public accounting firm of ProLogis contained in the Annual
Report of ProLogis on
Form 10-K
for the year ended December 31, 2010, which is incorporated
by reference into this joint proxy statement/prospectus, relates
to the historical financial information of ProLogis. It does not
extend to the unaudited prospective financial information and
should not be read to do so. Furthermore, the unaudited
prospective financial information does not take into account any
circumstances or events occurring after the date it was prepared.
62
The following table presents selected unaudited prospective
financial data for the fiscal years ending 2011 through 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
($ in millions)
|
|
|
EBITDA
|
|
$
|
749
|
|
|
$
|
747
|
|
|
$
|
810
|
|
|
$
|
857
|
|
|
$
|
904
|
|
Core funds from operations (Core FFO)
|
|
$
|
359
|
|
|
$
|
417
|
|
|
$
|
494
|
|
|
$
|
537
|
|
|
$
|
608
|
|
Adjusted funds from operations (AFFO)
|
|
$
|
339
|
|
|
$
|
376
|
|
|
$
|
433
|
|
|
$
|
471
|
|
|
$
|
541
|
|
For purposes of the unaudited prospective financial information
provided to J.P. Morgan and Morgan Stanley and presented
herein, EBITDA is calculated as net earnings plus
(i) depreciation and amortization (ii) non-cash cost
of share based compensation awards (iii) consolidated
interest expense (iv) income tax expense (v) preferred
dividends and net earnings attributable to non-controlling
interests, and (vi) changes in operating receivables and
distributions from unconsolidated funds, CDFS JVs and
unconsolidated investees; less (i) gains on dispositions of
non-development properties, and (ii) equity in earnings
from unconsolidated property funds, CDFS joint ventures, and
other unconsolidated investees.
For purposes of the unaudited prospective financial information
provided to J.P. Morgan and Morgan Stanley and presented
herein, core funds from operations is calculated as operating
income less interest expense, preferred share dividends, and
other reconciling line items, adjusted for non-cash items,
non-recurring items, and gains. Adjusted funds from operations
is calculated as core funds from operations plus
(i) corporate depreciation, (ii) non-cash interest
expense, (iii) non-cash convertible interest expense and
(iv) non-cash cost of share based compensation awards; less
(i) straight line rent adjustments (FAS 13),
(ii) recurring tenant improvements and leasing commissions
and (iii) recurring capital expenditures.
In addition to the summary metrics presented above, ProLogis
also provided a 2011 estimate of net operating income of
$609 million. For purposes of the unaudited prospective
financial information provided to J.P. Morgan and Morgan
Stanley and presented herein, net operating income represents
ProLogis share of consolidated income statement rental
income less consolidated income statement rental expenses.
ProLogis and AMB calculate certain non-GAAP financial metrics
including EBITDA, AFFO and NOI using different methodologies.
The differences relate to the following categories:
(i) treatment of each companys share of income and
cash flow from joint ventures and other unconsolidated
investments (ii) treatment of minority interest share of
consolidated income and cash flow; and (iii) definitional
differences related to certain adjustments made to calculate
AFFO. ProLogis has made conforming methodology changes to the
financial data received from AMB. Consequently, the financial
metrics presented in each companys prospective financial
information disclosures and in the sections of this joint proxy
statement/prospectus with respect to the opinions of the
financial advisors to AMB and ProLogis may not be directly
comparable to one another.
In preparing the foregoing unaudited projected financial
information, ProLogis made a number of assumptions regarding,
among other things, interest rates, corporate financing
activities, including amount and timing of the issuance of
senior and secured debt, ProLogis common share price
appreciation and the timing and amount of common share
issuances, annual dividend levels, occupancy and customer
retention levels of its owned and managed portfolios, changes in
rent, the amount, timing and cost of existing and planned
developments,
lease-up
rates of existing and planned developments, the amount and
timing of asset sales and asset acquisitions, including the
return on such acquisitions, the formation of, and expected
terms of, including yield on, future fund formations, the amount
of income taxes paid, and the amount of general and
administrative costs.
No assurances can be given that the assumptions made in
preparing the above unaudited prospective financial information
will accurately reflect future conditions. The estimates and
assumptions underlying the unaudited prospective financial
information involve judgments with respect to, among other
things, future economic, competitive, regulatory and financial
market conditions and future business decisions which may not be
realized and that are inherently subject to significant
business, economic, competitive and regulatory uncertainties and
contingencies, including, among others, risks and uncertainties
described under Risk Factors and Cautionary
Statement Regarding Forward-Looking Statements, all of
which are difficult to predict and many of which are beyond the
control of AMB
and/or
ProLogis and will be beyond the control of the combined company.
There can be
63
no assurance that the underlying assumptions will prove to be
accurate or that the projected results will be realized, and
actual results likely will differ, and may differ materially,
from those reflected in the unaudited prospective financial
information, whether or not the Merger is completed.
In addition, although presented with numerical specificity, the
above unaudited prospective financial information reflects
numerous assumptions and estimates as to future events made by
the management of ProLogis that the management of ProLogis
believed were reasonable at the time the unaudited prospective
financial information was prepared. The above unaudited
prospective financial information does not give effect to the
Merger. AMB stockholders and ProLogis shareholders are urged to
review the most recent SEC filings of ProLogis for a description
of the reported and anticipated results of operations and
financial condition and capital resources of ProLogis during
2010.
Readers of this joint proxy statement/prospectus are cautioned
not to place undue reliance on the unaudited prospective
financial information set forth above. No representation is made
by AMB, ProLogis or any other person to any AMB stockholder or
any ProLogis shareholder regarding the ultimate performance of
ProLogis compared to the information included in the above
unaudited prospective financial information. The inclusion of
unaudited prospective financial information in this joint proxy
statement/prospectus should not be regarded as an indication
that such prospective financial information will be an accurate
prediction of future events, and such information should not be
relied on as such.
PROLOGIS DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE ABOVE
UNAUDITED PROSPECTIVE FINANCIAL INFORMATION TO REFLECT
CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT
THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR
ALL OF THE ASSUMPTIONS UNDERLYING SUCH PROSPECTIVE FINANCIAL
INFORMATION ARE NO LONGER APPROPRIATE, EXCEPT AS MAY BE REQUIRED
BY LAW.
Pro Forma
Operational Data of the Combined Company
The combined company will be named ProLogis, Inc.
and will be a Maryland corporation that is a self-administered
and self-managed REIT for U.S. federal income tax purposes.
The combined company is expected to be a leading global owner,
operator and developer of industrial real estate. The combined
company is expected to have a pro forma equity market
capitalization of approximately $14 billion, a total market
capitalization in excess of $24 billion and gross assets
owned and managed of approximately $46 billion. The
combined company will own or manage approximately
600 million square feet (approximately 55 million
square meters) of modern distribution facilities located in key
gateway markets and logistics corridors in 22 countries.
The geographic distribution of the combined companys real
estate is expected to be as set forth in the table below upon
the closing of the Merger:
|
|
|
|
|
|
|
|
|
|
|
Square Feet
|
|
|
AUM(2)
|
|
|
|
|
|
|
(U.S. dollars, in billions)
|
|
|
|
(In
millions)(1)
|
|
|
|
|
|
The Americas
|
|
|
423
|
|
|
$
|
28
|
|
Europe
|
|
|
145
|
|
|
$
|
13
|
|
Asia
|
|
|
30
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
598
|
|
|
$
|
46
|
|
|
|
|
(1) |
|
Represents owned/managed real
estate at 100% share.
|
|
(2) |
|
Defined as gross book value of
owned/managed properties.
|
64
The largest customers of the combined company by annualized base
rent, on an owned and managed basis, are expected to be as set
forth in the table below upon the closing of the Merger:
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Combined Annualized
|
|
|
|
Base
Rent(1)
|
|
|
Deusche Post World Net (DHL)
|
|
|
2.6
|
%
|
Kuehne + Nagel
|
|
|
1.2
|
%
|
Home Depot
|
|
|
1.1
|
%
|
CEVA Logistics
|
|
|
1.0
|
%
|
Unilever
|
|
|
0.8
|
%
|
SNCF
|
|
|
0.7
|
%
|
United States Government
|
|
|
0.7
|
%
|
Sagawa Express
|
|
|
0.7
|
%
|
Wincanton Logistics
|
|
|
0.6
|
%
|
Nippon Express
|
|
|
0.5
|
%
|
Top 10 customers
|
|
|
9.9
|
%
|
|
|
|
(1) |
|
Annualized base rent is calculated
as monthly base rent (cash basis) per the terms of the lease, as
of December 31, 2010 and including contractual rent
escalations multiplied by 12, excluding any free rent periods.
|
The lease expirations for the combined companys owned and
managed operating properties for leases in place as of
December 31, 2010, without giving effect to the exercise of
renewal options or termination rights, if any, at or prior to
the scheduled expirations, is expected to be as set forth in the
table below upon the closing of the Merger:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized Base
|
|
|
|
Square
Feet(1)
|
|
|
Rent(2)
|
|
|
|
(In millions)
|
|
|
(U.S. dollars, in thousands)
|
|
|
2011
|
|
|
77
|
|
|
$
|
382,375
|
|
2012
|
|
|
85
|
|
|
|
445,723
|
|
2013
|
|
|
75
|
|
|
|
410,092
|
|
2014
|
|
|
62
|
|
|
|
341,774
|
|
2015
|
|
|
64
|
|
|
|
349,860
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
363
|
|
|
$
|
1,929,824
|
|
|
|
|
(1) |
|
Schedule includes leases that
expire on or after December 31, 2010. Schedule includes
owned and managed operating properties which are defined as
properties in which the combined company has at least a 10%
ownership interest, for which it is the property or asset
manager, and which the company currently intends to hold for the
long term.
|
|
(2) |
|
Annualized base rent is calculated
as monthly base rent (cash basis) per the terms of the lease, as
of December 31, 2010 and including contractual rent
escalations, multiplied by 12, excluding any free rent periods.
|
Interests
of AMB Directors and Executive Officers in the Merger
In considering the recommendation of the AMB board of directors
that AMB stockholders vote on the approval of the Topco merger
(including the issuance of AMB common stock and preferred stock
to ProLogis shareholders in connection with the Topco merger),
AMB stockholders should be aware that some of the executive
officers and directors of AMB may have interests in the Topco
merger that are different from, or in addition to, those of the
stockholders of AMB, generally. The AMB board of directors was
aware of these interests and considered them, among other
matters, in approving the merger agreement and making its
recommendations that the AMB stockholders approve the Topco
merger. For purposes of all of the AMB agreements and plans
described below, the completion of the transactions contemplated
by the merger agreement will constitute a change in control of
AMB.
Following the consummation of the Merger, Mr. Hamid R.
Moghadam, Ms. Lydia H. Kennard, Mr. J. Michael Losh,
Mr. Jeffrey L. Skelton and Mr. Carl B. Webb, each of
whom is currently a member of the AMB board of directors, will
be elected to the board of directors of the combined company.
65
Change
in Control and Noncompetition Agreements
AMB LP has previously entered into Amended and Restated Change
in Control and Noncompetition Agreements with each of AMBs
executive officers (Mr. Hamid R. Moghadam, Mr. Thomas
S. Olinger, Mr. Guy F. Jaquier, and Mr. Eugene F.
Reilly). On January 30, 2011, AMB LP entered into letter
agreements with each of AMBs executive officers which,
conditioned upon and effective as of the consummation of the
Topco merger, amend those agreements (we refer to such amended
agreements as the CIC agreements). The general
purpose of such amendments was to provide that the vesting of
equity awards held by the AMB executive officers would
accelerate only upon a severance-qualifying termination
following a change in control (instead of immediate acceleration
following the change in control). The CIC agreements have terms
that renew annually unless either party provides notice of
intent not to renew. In the event of a change in control of AMB,
such as the Topco merger, the term of the CIC agreement
automatically extends until 24 months after the date of
such change in control. In the event of a subsequent change in
control that occurs within the 24 month period following
the consummation of the Topco merger, the term of the CIC
agreements will extend for a period of 24 months beginning
on the date of any such change in control.
If, during the term of the CIC agreement and within
24 months following a change in control, such as the Topco
merger, an executive officers employment is terminated by
AMB for any reason other than cause, death,
disability or retirement, or if the executive
officer resigns for good reason (each as defined
under the CIC Agreement and referred to as a
severance-qualifying termination), the executive
officer is entitled to the following (in addition to accrued but
unpaid compensation and benefits): (i) a lump-sum severance
amount equal to two times the sum of the executive
officers (x) annual base salary and (y) average
annual bonus received by the executive officer over the three
most recent years preceding his termination of employment;
(ii) for 24 months or the earlier expiration of the
executive officers COBRA continuation coverage,
reimbursement for COBRA premiums and life insurance coverage for
the executive officer and his eligible dependents and
(iii) a lump-sum cash payment of two times the matching or
profit sharing contributions to which the executive officer
would have been entitled under AMBs 401(k) Plan for the
year of termination. In the event that any payments or benefits
made to the executive officer would be subject to the excise tax
imposed by Section 4999 of the Code, the executive officer
would receive an additional payment such that he would be placed
in the same after-tax position as if no excise tax had been
imposed.
For the purposes of the CIC agreements, good reason
generally means any material diminution or reduction in the
executive officers position, authority, duties,
responsibilities or annual base compensation, an involuntary
relocation, a failure of AMB to continue the executive
officers participation, on a basis not materially less
favorable, in any material compensation or benefit plan in which
the executive officer was eligible to participate prior to the
change in control (other than an equity-based plan), a material
diminution in the authority, duties or responsibilities of the
supervisor to whom the executive officer reports or any other
action that constitutes a material breach of the CIC agreement,
except that (i) Mr. Moghadams position as
co-chief executive officer of the combined company with
Mr. Walter C. Rakowich, until the earlier of
(x) Mr. Rakowichs retirement or other
termination of employment or (y) January 1, 2013 and
(ii) Mr. Olingers position as Chief Integration
Officer of the combined company until the earlier of
(x) Mr. William E. Sullivans retirement or other
termination of employment or (y) January 1, 2013, in
each case will not constitute good reason under
their respective CIC agreements.
On January 30, 2011, AMB and each of Mr. Moghadam and
Mr. Olinger entered into letter agreements which further
provide that Mr. Moghadam will become the sole chief
executive officer of the combined company and Mr. Olinger
will become the chief financial officer of the combined company,
in each case no later than January 1, 2013.
As provided in the merger agreement, in connection with the
Topco merger, AMB may grant 20,000 shares of restricted
stock to each of Mr. Olinger, Mr. Jaquier and
Mr. Reilly.
Based on compensation and benefit levels in effect on
April 6, 2011, and assuming that the Topco merger was
completed on April 6, 2011 and, immediately thereafter,
each executive officer incurs a severance-qualifying
termination, each of Mr. Moghadam, Mr. Olinger,
Mr. Jaquier and Mr. Reilly would be entitled to
receive $6,673,119, $1,778,457, $2,014,046, and $2,078,713,
respectively, in cash severance payments under their CIC
66
agreements (including the COBRA and life insurance premium
reimbursement described above for the maximum available period).
Equity
Compensation Awards
Each of the CIC agreements provides that upon a
severance-qualifying termination or a termination of the
executive officers employment due to death or
disability, in each case during the two-year period
following the consummation of the Topco merger, all equity or
equity-based awards then held by the applicable executive
officer and which also have been held by the executive officer
at the time of the Topco merger will vest and all restrictions
will lapse.
Based on AMB equity compensation holdings as of April 6,
2011, and assuming that the Topco merger was completed on
April 6, 2011 and, immediately thereafter, each executive
officer incurs a severance-qualifying termination, as to
Mr. Moghadam, Mr. Olinger, Mr. Jaquier and
Mr. Reilly, (1) the number of options to purchase AMB
common stock that would vest in connection with such
severance-qualifying termination is 588,848, 34,265, 162,899 and
56,456, respectively, and (2) the number of shares of
restricted stock that would vest in connection with such
severance-qualifying termination is 140,486, 56,647, 85,921 and
117,065, respectively.
AMB
Deferred Compensation Plans
AMB currently maintains two deferred compensation plans for its
executive officers and non-employee directors: the Amended and
Restated 2005 Non-Qualified Deferred Compensation Plan (which we
refer to as the 2005 Plan) and the Amended and
Restated 2002 Nonqualified Deferred Compensation Plan (which we
refer to as the 2002 Plan). Each of the executive
officers, with the exception of Mr. Reilly, participates in
one or both of the deferred compensation plans. Both the 2005
Plan and the 2002 Plan provide that upon a change in control of
AMB, such as the Topco merger, participants will receive a
lump-sum payment equal to his or her vested account balance.
Payments under the 2005 Plan are required to be made as soon as
possible after the change in control but in no event later than
the later of (i) December 31 of the calendar year in which
the change in control occurs or (ii) the 15th day of
the third month following the date of the change in control.
Payments of vested account balances under the 2002 Plan, which
are treated as grandfathered for purposes of
Section 409A of the Code, are required to be made
immediately prior to the change in control unless the
administrator of such plan determines, in its sole discretion,
to defer payment for a period of up to 13 months after the
change in control.
AMB
2011 Supplemental Non-Qualified Deferred Compensation
Plan
On January 30, 2011, the AMB board of directors adopted the
new NQDC Plan, conditioned upon and effective as of the
consummation of the Topco merger. The purpose of the new NQDC
Plan is to provide the opportunity for participants in the 2002
Plan and the 2005 Plan (which we collectively referred to as the
old NQDC Plans) to continue to receive tax-deferred
earnings with respect to the shares or cash withheld to pay
taxes as a result of the required, non-waivable, distributions
from the old NQDC Plans which will be triggered by the
consummation of the Topco merger, as described above. These
grants would not make participants whole for taxes paid
on the required distributions; the intent is to compensate the
executives for the fact that those taxes will be paid earlier
than both they and AMB anticipated when deferrals under the old
NQDC Plans were made.
Each participant in the old NQDC Plans who remains employed (or,
as to non-employee director participants, a member of the
combined companys board) immediately following the
consummation of the Topco merger will receive an opening grant
under the new NQDC Plan at that time. The base amount of the
grant (i.e., the amount on which the value of the award will be
determined) will equal the taxes paid on distributions paid due
to the consummation of the Topco merger under the old NQDC
Plans. These grants will be in the form of combined company
stock units or cash credits to match the form of each
participants deemed investment under the old NQDC Plans.
Dividend equivalents on stock units held in the new NQDC Plan
will be deemed reinvested in additional stock units or directed
to other investments, at the participants election. Each
stock unit will entitle the applicable participant to a
distribution at a future date (selected by the participant in
accordance with Section 409A of the Code) of a number of
shares of the stock of the combined company equal to:
(i) with respect to the stock units credited at closing,
(x) the increase, if any, in the value of a share of
combined company stock after the closing,
67
divided by (y) the value of a share of combined company
stock on the distribution date, plus (ii) the total number
of stock units credited to such participants account in
respect of dividend equivalents. If a participant is credited
with a notional cash balance under the new NQDC Plan as of the
consummation of the Topco merger, the participant will receive
the notional earnings (if any) on that cash balance at
distribution. A trust (commonly known as a rabbi
trust) will be created to hold shares of combined company
stock and cash reflecting the opening account balances of stock
units and cash, respectively, in the new NQDC Plan, and the
accretions thereon. The participants in the new NQDC Plan will
be entitled to direct the plan trustee on how to vote the shares
held in the trust on a pro rata basis.
Assuming an aggregate state and federal tax rate of 45%, based
on the aggregate account balance of each of Mr. Moghadam,
Mr. Olinger, Mr. Jaquier and the two non-employee
directors (as a group), under the old NQDC Plans as of
April 8, 2011, the opening grant of each such executive
officer and the two non-employee directors (as a group), in the
new NQDC Plan will be $27,678,084, $132,806, $2,393,871 and
$451,483, respectively. Each participant will have the right to
vote the shares of stock of the combined company held in the
trust relating to the new NQDC Plan in proportion to the stock
units credited to the participants account.
Interests
of ProLogis Trustees and Executive Officers in the
Merger
In considering the recommendation of the ProLogis board of
trustees that ProLogis shareholders vote in favor of the merger
agreement and the transactions contemplated thereby, including
the ProLogis merger and the Topco merger, ProLogis shareholders
should be aware that some of the executive officers and trustees
of ProLogis may have interests in the Merger that are different
from, or in addition to, those of the shareholders of ProLogis,
generally. The ProLogis board of trustees was aware of these
interests and considered them, among other matters, in
evaluating and negotiating the merger agreement and the Merger,
in approving the merger agreement and in recommending that the
ProLogis shareholders approve the Merger.
Following the consummation of the Merger, six persons selected
by ProLogis will be elected to the board of directors of the
combined company. One of those persons will be the ProLogis
chief executive officer, Mr. Walter C. Rakowich, who will
also become the co-chief executive officer and chairman of the
executive committee of the board of directors of the combined
company, and another will be Mr. Irving F. Lyons III, a
current member of the board of trustees of ProLogis, who will
become the lead independent director of the combined
corporation. Three of the remaining four persons selected by
ProLogis (Mr. George L. Fotiades, Ms. Christine Garvey
and Mr. D. Michael Steuert) are current members of the
ProLogis board of trustees.
Employment
and Executive Protection Agreements
Employment
Agreement with Walter C. Rakowich
Mr. Rakowich and ProLogis are currently parties to a Third
Amended and Restated Employment Agreement dated as of
January 7, 2009 which provides Mr. Rakowich with
payments and benefits if his employment is terminated under
certain circumstances (which we refer to as the Current
Agreement). On January 30, 2011, Mr. Rakowich
entered into an agreement with ProLogis pursuant to which he
waived any right that he would have to terminate employment with
ProLogis and receive payments and benefits under the terms of
the Current Agreement solely because he will be the co-chief
executive officer the combined company following the Topco
merger. Mr. Rakowichs Current Agreement otherwise
remains in effect and will expire by its terms on
December 31, 2011, subject to earlier termination in
accordance with its terms. ProLogis may also pay
Mr. Rakowich up to $20,000 to reimburse him for legal fees
incurred in preparation and negotiation of his new employment
agreement.
On January 30, 2011, Mr. Rakowich entered into a new
employment agreement with ProLogis (which we refer to as the
New Agreement) which will become effective on
January 1, 2012, provided that the Topco merger has
occurred by that date and provided that he is still employed on
that date, and which will expire on December 31, 2012,
subject to earlier termination in accordance with its terms. The
New Agreement generally provides that he will provide services
as the co-chief executive officer of the combined company and
will be primarily responsible for integration of the real estate
portfolios, as well as for operations, dispositions, capital
deployment and risk management following the Topco merger. The
New Agreement provides that, for 2012, Mr. Rakowich will
receive:
|
|
|
|
|
an annual base salary of $1,000,000;
|
68
|
|
|
|
|
a target bonus equal to 150% of his salary, with an actual
bonus, generally conditioned upon satisfaction of performance
criteria, of not less than zero or more than 200% of the target
bonus;
|
|
|
|
a target incentive award having an aggregate value of
$4,800,000, with an actual incentive award, generally
conditioned upon satisfaction of performance criteria, of not
less than 60% and not more than 160% of the target incentive
award; and
|
|
|
|
participation in standard benefit plans.
|
Certain performance payments are subject to
claw-back in the event of material modifications or
material restatements of the combined companys financial
statements. Mr. Rakowich is also entitled to coverage under
the combined companys directors and officers insurance and
to indemnification on the same basis as under his existing
employment agreement with ProLogis.
If Mr. Rakowichs employment terminates during the
term of the New Agreement for any reason, he will be entitled to
payments of accrued salary and vacation, bonuses for prior
periods and payments to which he is entitled under applicable
benefit plans (which we refer to as the Accrued
Benefits).
If his employment is terminated during the term of the New
Agreement by the combined company for cause (as defined in the
New Agreement) or if he terminates other than for good reason
(as defined in the New Agreement), he will not be entitled to
any payments or benefits other than the Accrued Benefits.
If his employment terminates during the term of the New
Agreement due to death or disability, he will be entitled to a
bonus for the year of termination based on actual performance
for that year and pro-rated through the date of termination and
a pro-rata portion of the Target Incentive Award for that year
(without regard to satisfaction of performance criteria). He
will also be fully vested in any incentive awards awarded for
prior periods, subject to satisfaction of applicable performance
criteria.
If his employment is terminated during the term of the New
Agreement by the combined company other than for cause or if he
resigns for good reason (each as defined under the New
Agreement) or upon expiration of the term of the New Agreement,
he will be entitled to:
|
|
|
|
|
his salary through the end of 2012;
|
|
|
|
$6,000,000;
|
|
|
|
his target bonus (provided that his employment does not
terminate as the result of the expiration of the term of the New
Agreement); and
|
|
|
|
continuing medical benefits through December 31, 2014
(subject to earlier termination if he becomes eligible to
receive comparable benefits through other employment).
|
The foregoing payments will generally be paid in installments
over two years following the termination and are conditioned
upon Mr. Rakowichs compliance with restrictive
covenants, including a non-compete and non-solicitation
provision. Also under such termination circumstances described
in the preceding paragraph, Mr. Rakowich will be entitled
to:
|
|
|
|
|
a lump sum payment of $12,000 in lieu of certain welfare
benefits;
|
|
|
|
vesting and payment of the incentive award to which he would
otherwise be entitled for 2012 (and if the incentive award for
2011 has not then been granted, the incentive award for 2011),
based on actual performance for the applicable period without
pro-ration, such payment to be made to Mr. Rakowich at the
same time as incentive awards for the applicable period are
otherwise provided to similarly situated corporate-level
executives; and
|
|
|
|
vesting of incentive awards for prior periods subject to
satisfaction of any performance conditions without pro-ration.
|
Termination payments and benefits are generally conditioned upon
Mr. Rakowichs release of claims.
69
The New Agreement also provides that if Mr. Rakowichs
employment is terminated prior to January 1, 2012 under
circumstances that would have entitled him to the foregoing
termination benefits under the New Agreement had he been
employed on January 1, 2012, he will be entitled to a
payment equal to $7,300,000, payable in a lump sum no later than
March 15, 2012, in addition to payments and benefits, if
any, to which he is entitled under the Current Agreement.
The New Agreement also provides that Mr. Rakowich will be
subject to confidentiality, non-competition and non-solicitation
restrictions during his employment and for a period thereafter
and that he may be entitled to certain reimbursement and
advancement of costs he incurs in enforcing the agreement.
The New Agreement, as well as the Current Agreement, will be
assumed by the combined company at the time of the Topco merger.
Executive
Protection Agreements with Edward S. Nekritz and William E.
Sullivan
ProLogis is currently party to Executive Protection Agreements
with each of Mr. Edward S. Nekritz and
Mr. William F. Sullivan. The Executive Protection
Agreements for Mr. Nekritz and Mr. Sullivan generally
provide that, for a period of 24 months following a change
of control, the executive is entitled to an annual salary that
is not less than that provided prior to such period, minimum
bonus requirements and participation in incentive compensation
and employee benefit plans. Prior to the amendments described
below, the Executive Protection Agreements with Mr. Nekritz
and Mr. Sullivan provide that if the executive
officers employment is terminated by ProLogis for any
reason other than death, Disability or
Cause, or if the executive officer resigns as a
result of a Constructive Discharge (each as defined
under the Executive Protection Agreement and referred to as a
qualifying termination), in each case during the
24-month
period following a change of control, the executive officer is
entitled to the following (in addition to accrued but unpaid
compensation): (i) a pro rata bonus payable for the
performance period in which the qualifying termination occurs,
with payment based on achievement of a target level of
performance for the period (regardless of actual performance for
the period), (ii) a lump sum severance amount equal to two
times the sum of the executives (x) annual base
salary and (y) target level of annual bonus for the fiscal
year in which the qualifying termination occurs; (iii) for
24 months following the qualifying termination, continued
medical and life insurance coverage for the executive officer
and his dependents, (iv) outplacement services for up to
twelve months following the qualifying termination, and
(v) full vesting in the executive officers interest
in ProLogis nonqualified savings plan. In addition, all
outstanding equity or equity-based awards held by the executive
officer will vest and become exercisable or payable. In the
event that any payments or benefits made to the executive
officer would be subject to the excise tax imposed by
Section 4999 of the Code, the executive officer would
receive an additional payment such that he would be placed in
the same after-tax position as if no excise tax had been
imposed; provided, however, that if a reduction in such payments
to an amount that is not less than 90% of the value of the
payments would result in no excise tax under Section 4999
of the Code, the payments shall be reduced in accordance with
the terms of the Executive Protection Agreement to the extent
required to avoid the excise tax.
For purposes of the Executive Protection Agreements for
Mr. Nekritz and Mr. Sullivan, a Constructive
Discharge would occur if the executive terminated
employment for good reason. Good reason is generally
defined for this purpose to mean a substantial adverse
alteration in the nature of the executive officers status
or responsibilities, a material failure to provide the executive
officer with compensation and benefits in accordance with the
agreement or ProLogis material breach of the agreement.
The Executive Protection Agreements with Mr. Nekritz and
Mr. Sullivan were amended, conditioned upon the Topco
merger, to provide that the consummation of the Topco merger
will be deemed to be a change in control for purposes of their
Executive Protection Agreements, and to make other changes
described below, although no payments will be made under such
agreements unless there is a qualifying termination event during
the term. In the case of Mr. Sullivan, the term of the
Executive Protection Agreement as amended, ends on
December 31, 2012. In the case of Mr. Nekritz, the
term of the agreement as amended, extends for a period of two
years following the Topco merger; provided, however, that if a
subsequent change in control (as defined in the Executive
Protection Agreements) occurs within the two-year term
commencing at the effective time of the Topco merger, the term
will be extended for an additional two-year period beginning
with the date of any such subsequent change in control.
70
The amendment to the Executive Protection Agreement for
Mr. Nekritz broadens the circumstances under which
Mr. Nekritz may terminate his employment during the term of
the agreement and receive benefits under the agreement to
include a relocation from the current ProLogis headquarters
location and certain reductions in pay. The amendment to
Mr. Sullivans agreement acknowledges that he will
receive benefits under the agreement if he terminates his
employment upon at least 30 days advance notice
following the effective date of the Topco merger and ending on
December 31, 2012. Finally, the amendments provide that
even though all outstanding equity awards held by the covered
executive officer at the time of termination would otherwise
vest upon a qualifying termination, with respect to awards that
are made in connection with the Topco merger that vest ratably
over three years, the executive officer will receive a pro-rata
portion of the tranche that would otherwise vest in the year of
termination based on the time elapsed since the last vesting
date.
The combined company is required to assume all rights, powers,
duties and obligations of ProLogis under the Executive
Protection Agreements at the effective time of the Topco merger.
All other terms and conditions of the Executive Protection
Agreements remain in effect.
Based on compensation and benefit levels in effect on
April 6, 2011, and assuming that the Merger was completed
on April 6, 2011 and, immediately thereafter, each
executive officer incurs a severance-qualifying termination,
each of Mr. Rakowich, Mr. Sullivan and
Mr. Nekritz will be entitled to receive $15,810,630,
$2,654,690 and $2,414,384, respectively, in cash severance
payments under their employment or executive protection
agreements, as applicable (not including the value of certain
medical, dental and life insurance benefits and outplacement
services estimated to be $25,840, $30,770 and $35,200,
respectively).
Employment
Agreement with Mr. Antenucci
Mr. Antenucci is not party to an Executive Protection
Agreement with ProLogis. Although he is a party to an employment
agreement with ProLogis pursuant to which he may be entitled to
severance payments and benefits under certain circumstances, Mr.
Antenuccis employment with ProLogis will terminate no
later than June 30, 2011 under circumstances unrelated to
the consummation of the Merger, and as such, any severance
payments or benefits that he may be entitled to receive, if
applicable, are not related to, or contingent upon, the Merger.
Equity
Compensation Awards
As mentioned above, each of the agreements provides that upon a
qualifying termination, certain equity and equity-based
incentive awards will become fully vested. In addition, in
connection with the Topco merger, Mr. Nekritz will receive
75,000 restricted share unit awards from ProLogis.
Based on ProLogis equity compensation holdings as of
April 6, 2011, and assuming that the Merger was completed
on April 6, 2011 and, immediately thereafter, each
executive officer incurs a qualifying termination which results
in full vesting of his equity or equity-based incentive awards,
as to Mr. Rakowich, Mr. Sullivan and Mr. Nekritz
(i) the number of options to purchase ProLogis common
shares that would vest in connection with such
severance-qualifying termination is 0, 198,453 and 130,476,
respectively and (ii) the number of restricted share units
that would vest in connection with such qualifying termination
is 0, 268,986 and 208,700, respectively, and (iii) the
number of performance shares and accrued dividend equivalents
that would vest in connection with such qualifying termination
is 0, 88,527 and 46,780, respectively. Mr. Rakowichs
equity or equity-based incentive awards (options to acquire
145,081 common shares, 470,988 restricted share units and
accrued dividend equivalents and 334,722 performance shares and
accrued dividend equivalents) will continue to vest in
accordance with their original vesting schedule.
Directors
and Management Following the Merger
Initial
Board Composition
Following the consummation of the Merger, the board of directors
of the combined company will have eleven members, consisting of
(i) Mr. Hamid R. Moghadam, the current chief executive
officer of AMB; (ii) Mr. Walter C. Rakowich, the
current chief executive officer of ProLogis;
(iii) Ms. Lydia H. Kennard, Mr. J. Michael Losh,
Mr. Jeffrey Skelton and Mr. Carl B. Webb, each of whom
was selected by the AMB board of directors and is currently a
member of the AMB board of directors; and
(iv) Mr. Irving F. Lyons III, Mr. George L.
Fotiades, Ms. Christine Garvey, Mr. D.
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Michael Steuert and Mr. William D. Zollars, each of whom
were selected by the ProLogis board of trustees and each of whom
(other than Mr. Zollars) is currently a member of the
ProLogis board of trustees.
Mr. Moghadam will become the chairman of the board of the
combined company (which will not be an executive officer
position at the combined company), Mr. Rakowich will become
the chairman of the executive committee of the board, and
Mr. Lyons will become the lead independent director.
Mr. Zollars, age 63, was a trustee of ProLogis from
June 2001 to May 2010. Mr. Zollars has been the chairman of
the board and chief executive officer of YRC Worldwide Inc., a
holding company specializing in the transportation of
industrial, commercial, and retail goods, since November 1999.
Mr. Zollars is a director of Cerner Corporation (computer
integrated systems design) and CIGNA Corporation (hospital and
medical service plans).
Board
Committees
The board of directors of the combined company will have four
committees, consisting of an audit committee, a compensation
committee, an executive committee, and a nominating &
governance committee (which will include in its charter the
current responsibilities of the corporate responsibility
committee of ProLogis). Mr. Losh (chair), Ms. Garvey
and Mr. Steuert will serve as members of the audit
committee, Mr. Fotiades (chair), Mr. Webb and
Mr. Zollars will serve as members of the compensation
committee, Mr. Rakowich (chair), Mr. Lyons,
Mr. Moghadam and Mr. Skelton will serve as members of
the executive committee and Ms. Kennard (chair),
Mr. Skelton and Mr. Zollars will serve as members of
the nominating & governance committee. The role of the
executive committee will be to meet and act separately if board
action is required, the matter is time-sensitive and the full
board of directors is unavailable or unable to act in the
required time frame.
Officers
of the Combined Company
Upon the closing of the Merger, Mr. Moghadam and
Mr. Rakowich will become co-chief executive officers of the
combined company. On December 31, 2012, Mr. Rakowich
will resign as co-chief executive officer and as a member of the
board of directors, and Mr. Moghadam will become the sole
chief executive officer of the combined company and remain
chairman of the board of the combined company.
The bylaws of the combined company will provide that the
affirmative vote of at least 75% of the independent directors of
the combined company is required to take any of the following
actions:
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removal of Mr. Moghadam from the office of co-chief
executive officer of the combined company prior to
December 31, 2012 or removal of Mr. Moghadam from the
office of chief executive officer or chairman of the board of
directors of the combined company prior to December 31,
2014;
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removal of Mr. Rakowich as co-chief executive officer of
the combined company prior to December 31, 2012;
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appointment of any person as chief executive officer or co-chief
executive officer of the combined company, other than, prior to
December 31, 2012, Mr. Moghadam or Mr. Rakowich,
or, after December 31, 2012 and prior to December 31,
2014, Mr. Moghadam;
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appointment of any person, other than Mr. Moghadam, as
chairman or co-chairman of the board of directors of the
combined company prior to December 31, 2014;
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failure to nominate Mr. Moghadam or Mr. Rakowich as a
director of the combined company in any election of directors
where the term of such directorship commences prior to
December 31, 2014 or December 31, 2012,
respectively; or
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a material alteration, limitation or curtailment of the
authority granted pursuant to the bylaws of the combined company
to the chief executive officer, co-chief executive officer or
chairman of the board prior to December 31, 2014.
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In addition, the affirmative vote of at least 75% of the
independent directors of the combined company is required to
amend, modify or repeal, or adopt any bylaw provision
inconsistent with, the foregoing provisions.
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The current chief financial officer of ProLogis,
Mr. William E. Sullivan, will become chief financial
officer of the combined company, and the current chief financial
officer of AMB, Mr. Thomas S. Olinger, will become chief
integration officer of the combined company. On
December 31, 2012, Mr. Sullivan will retire from the
combined company and Mr. Olinger will become the chief
financial officer of the combined company.
Following the closing of the Merger, Mr. Michael S. Curless
will act as chief investment officer of the combined company,
Mr. Guy F. Jaquier will act as chief executive officer,
private capital, Mr. Gary E. Anderson will act as chief
executive officer, Europe & Asia, Mr. Eugene F.
Reilly will act as chief executive officer, the Americas,
Mr. Edward S. Nekritz will act as chief legal officer and
general counsel, and Ms. Nancy Hemmenway will act as chief
human resources officer.
Treatment
of ProLogis Share Options and Other Equity-Based
Awards
Upon completion of the Topco merger, outstanding share options
to purchase ProLogis common shares, share unit awards with
respect to ProLogis common shares, dividend equivalent units
with respect to ProLogis common shares and performance share
awards denominated in ProLogis common shares will generally be
assumed by the combined company without any action on the part
of their holders, and converted into stock options, stock unit
awards, dividend equivalent units and performance stock awards
with respect to common stock of the combined company, on the
same terms and conditions (including the vesting schedule, if
applicable), except that:
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each ProLogis share option will be exercisable for that number
of shares of common stock of the combined company equal to the
number of ProLogis common shares subject to the share option
multiplied by the exchange ratio (0.4464), and the per share
exercise price for the shares of common stock of the combined
company will be equal to the quotient determined by dividing the
original exercise price of each ProLogis common share subject to
such assumed ProLogis share option by the exchange ratio
(0.4464);
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each ProLogis share unit award, dividend equivalent unit award
and performance share award will be converted into the right to
receive that number of shares of the common stock of the
combined company equal to the number of ProLogis common shares
subject to the respective award multiplied by the exchange ratio
(0.4464).
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Equity awards of AMB will remain outstanding upon completion of
the Merger as equity awards of the combined company.
Participants in the ProLogis Employee Share Purchase Plan may
not increase their payroll deductions thereunder from those in
effect on January 30, 2011 and no employee may commence
participation in the plan following January 30, 2011. The
ProLogis Employee Share Purchase Plan will be automatically
suspended effective as of the earlier of June 30, 2011 or
the payroll period of ProLogis ending immediately prior to the
closing of the Topco merger, but in no event less than ten
business days prior to the closing of the Topco merger, and any
contributions made for the offering period in effect as of
January 30, 2011, the date of the merger agreement. will be
applied to the purchase of ProLogis common shares, and any cash
remaining in the ProLogis Employee Share Purchase Plan after
such suspension date will be promptly refunded to plan
participants.
Accounting
Treatment
The Merger will be accounted for as a purchase, as
that term is used under GAAP, for accounting and financial
reporting purposes. Under purchase accounting, the assets
(including identifiable intangible assets) and liabilities
(including executory contracts and other commitments) of AMB as
of the effective time of the Topco merger will be recorded at
their respective fair values and added to those of ProLogis. Any
excess of purchase price over the fair values is recorded as
goodwill. Consolidated financial statements of the combined
company issued after the Merger would reflect these fair values
and would not be restated retroactively to reflect the
historical consolidated financial position or results of
operations of AMB.
Regulatory
Approvals Required for the Merger
AMB and ProLogis are not required to make notifications under
the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules
promulgated thereunder by the Federal Trade Commission.
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Competition approvals for the Merger were required and have been
obtained from the antitrust authorities in Canada, Germany and
Mexico. In particular, competition consents were sought from the
German antitrust authority (Bundeskartellamt), pursuant to the
German Competition Law (Act Against Restraints of Competition of
1998, as amended), and the Mexican competition commission,
Commission Federal de Competencia, pursuant to Article 20
of the Federal Law of Economic Competition. Competition consent
was also sought and obtained from the Canadian Competition
Bureau in Canada, pursuant to the Competition Act (Canada).
At any time before or after the combination, the Antitrust
Division of the U.S. Department of Justice and the Federal
Trade Commission, or a U.S. state attorney general could
take action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin
the combination or seeking divestiture of assets of AMB or
ProLogis or their respective subsidiaries. Private parties may
also bring legal actions under the antitrust laws under certain
circumstances. While AMB and ProLogis do not expect any such
action to be taken, they can give no assurance that a challenge
to the combination will not be made or, if made, would be
unsuccessful.
Exchange
of Shares in the Merger
At or prior to the effective time of the Merger, AMB will
appoint an exchange agent to handle the exchange of certificates
formerly representing ProLogis common shares for shares of
common stock of the combined company and the exchange of
certificates formerly representing ProLogis preferred shares for
shares of preferred stock of the combined company. Promptly
after the effective time of the Topco merger, the exchange agent
will send to each holder of record of ProLogis common shares and
ProLogis preferred shares at the effective time of the Merger
who holds such shares in certificated or book-entry form (which
we refer to as the ProLogis certificates), a letter
of transmittal and instructions for effecting the exchange of
the ProLogis certificates for the merger consideration the
holder is entitled to receive under the merger agreement. Upon
surrender of ProLogis certificates for cancellation along with
the executed letter of transmittal and other documents described
in the instructions, a former holder of ProLogis common shares
or ProLogis preferred shares will receive one or both of the
following: (i) one or more shares of common stock or
preferred stock of the combined company and (ii) cash in
lieu of fractional shares of common stock of the combined
company. After the closing of the Merger, ProLogis will not
register any transfers of the shares of ProLogis common shares
and ProLogis preferred shares. The shares of stock of the
combined company stock shareholders receive in the Merger will
be issued in book-entry form.
Because the Topco merger will occur immediately after the
ProLogis merger, ProLogis shareholders will not receive
certificates representing shares of New Pumpkin common stock or
preferred stock prior to the receipt of common stock and
preferred stock of the combined company to be issued in the
Topco merger.
If you are an AMB stockholder, you are not required to take any
action with respect to your AMB stock certificates. Such
certificates will continue to represent shares of the combined
company after the Topco merger. However, after the Topco merger
is completed, the exchange agent for the combined company will
send you a letter of transmittal and instructions for exchanging
your AMB stock certificates for stock certificates of the
combined company. Upon surrender of the certificates for
cancellation along with the executed letter of transmittal and
other required documents described in the instructions, an AMB
stockholder will receive a stock certificate of the combined
company.
Dividends
Each company plans to continue its current dividend policy until
the closing of the Merger. The parties each intend to pay
distributions on their preferred shares at their stated dividend
or distribution rates and quarterly dividends to their common
stockholders at a rate not in excess of $0.28 per share of AMB
common stock and $0.1125 per ProLogis common share. AMB and
ProLogis have agreed to coordinate their regular quarterly
dividends for their common stockholders so that, if one group of
common stockholders receives any dividend for a quarter, the
other group of common stockholders will also receive a dividend
for such quarter at the same time. AMB and ProLogis have agreed
that the other party, with notice to the other, can declare or
pay the minimum dividend as may be required in order for such
party to qualify as a REIT and to avoid to the extent reasonably
possible the incurrence of income or excise tax (which we refer
to as a REIT dividend). If one party declares a REIT
dividend, the other party can declare a dividend per share in
the same amount, as adjusted by the exchange ratio.
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Following the closing of the Merger, the parties intend that the
combined company will maintain a dividend policy that will allow
it to maintain its status as a REIT and avoid to the extent
reasonably possible the incurrence of income or excise tax.
Listing
of AMB Common Stock and Preferred Stock
It is a condition to the completion of the Merger that the AMB
common stock, AMB Series R preferred stock, and AMB
Series S preferred stock issuable in the Topco merger and
the AMB common stock to be authorized and reserved for issuance
upon exchange or redemption of partnership units by limited
partners in certain of ProLogis partnerships, upon the
conversion or exchange of certain of ProLogis convertible
debt or upon exercise or settlement of options and other equity
awards to purchase AMB common stock issued in substitution for
ProLogis options and other equity awards be approved for listing
on the NYSE, subject to official notice of issuance.
De-Listing
and Deregistration of ProLogis Common Shares and Preferred
Shares
When the Merger is completed, the ProLogis common shares and
each series of ProLogis preferred shares currently listed on the
NYSE will cease to be quoted on the NYSE and will be
deregistered under the Exchange Act.
No
Appraisal or Dissenters Rights
Under
Section 8-501.1(j)
of the Maryland REIT Law (which we refer to as the
MRL) and
Section 3-202
of the Maryland General Corporation Law (we refer to the
Maryland General Corporation Law as the MGCL and we
refer to the MRL and the MGCL together as Maryland
law), holders of ProLogis common shares, ProLogis
Series C preferred shares, ProLogis Series F preferred
shares and ProLogis Series G preferred shares do not have
the right to receive the appraised value of their shares in
connection with the Merger because they are listed on the NYSE
and/or are
not entitled to vote on the Merger.
Litigation
Relating to the Merger
Following the announcement of the merger agreement, several
lawsuits were filed. Three of the actions were filed in the
District Court for the City and County of Denver, Colorado.
These cases have been consolidated, and on or about
April 1, 2011, plaintiffs filed a consolidated class action
complaint against ProLogis, the members of the ProLogis board of
trustees, AMB, New Pumpkin, Upper Pumpkin, Pumpkin LLC and AMB
LP. The complaint alleges that ProLogis trustees breached
their fiduciary duties in connection with entering into the
merger agreement and that ProLogis, AMB, New Pumpkin, Upper
Pumpkin, Pumpkin LLC and AMB LP aided and abetted the breaches
of those fiduciary duties. The complaint further alleges that
the registration statement of which this joint proxy
statement/prospectus forms a part contains material omissions
and misstatements. The plaintiffs seek, among other relief, an
order to (i) enjoin the defendants from consummating the
Merger unless and until ProLogis adopts and implements a
procedure or process reasonably designed to enter into a merger
agreement providing the best possible value for ProLogis
shareholders, (ii) direct the defendants to exercise their
fiduciary duties to obtain a transaction that is in the best
interests of ProLogis shareholders and to refrain from
entering into any transaction until the process for the sale or
merger of ProLogis is completed and the highest possible value
obtained, (iii) rescind the merger agreement, to the extent
already implemented, and (iv) award plaintiffs costs
and disbursements of the action. Defendants have moved to stay
the Colorado action in favor of the Maryland action described
below. Plaintiffs have moved for expedited discovery, and the
defendants have opposed that motion.
Two of the actions were filed in the Circuit Court of Maryland
for Baltimore City. The actions have been consolidated, and the
plaintiffs filed a consolidated class action and derivative
complaint on or about March 28, 2011. The Maryland
consolidated complaint names the same defendants as the Colorado
consolidated complaint. The complaint alleges that the members
of the ProLogis board of trustees breached their fiduciary
duties in connection with the Merger and that AMB and AMB LP
aided and abetted the breaches of those fiduciary duties. The
complaint further alleges that the registration statement of
which this joint proxy statement/prospectus forms a part is
misleading and incomplete. The plaintiffs in this action seek,
among other relief, an order to (i) enjoin, preliminarily
and permanently, the Merger, (ii) rescind the Merger in the
event it is consummated or award rescissory damages,
(iii) direct the defendants to account to plaintiffs and
all other members of the class for all
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damages, profits and any special benefits defendants obtained
as a result of their breaches of fiduciary duties and
(iv) award plaintiffs the costs of the action. Defendants
moved to dismiss the Maryland action for failure to state a
claim and to stay all discovery pending a ruling on their motion
to dismiss; plaintiffs have moved for expedited discovery in
advance of a preliminary injunction hearing.
On April 15, 2011, the parties to the Maryland action
executed a memorandum of understanding that embodies their
agreement in principle on the structure of a proposed
settlement. The proposed settlement, which is subject to
confirmatory discovery and court approval following notice to
the class of all ProLogis shareholders during the period from
January 30, 2011 through the date of the consummation of
the Merger (which we refer to as the Class), would
dismiss all causes of action asserted in the Maryland
consolidated complaint and release all claims that members of
the Class may have arising out of or relating in any manner to
the Merger, including all claims being asserted in the Colorado
action. Pursuant to the terms of the proposed settlement,
defendants agreed to make certain disclosures to shareholders in
this joint proxy statement/prospectus. The parties reported to
the Maryland court on April 18, 2011 that they had reached
agreement on a proposed settlement and executed a memorandum of
understanding. On April 27, 2011, the parties to the
consolidated action in Colorado reached an agreement in
principle on the structure of a proposed settlement. Under the
proposed settlement, which is subject to confirmatory discovery
and approval of the Maryland court following notice to the
Class, defendants agreed to make additional disclosures in this
joint proxy statement/prospectus.
The defendants believe that the claims asserted against them in
these lawsuits are without merit and, absent court approval of
the proposed settlement, intend to defend themselves vigorously
against the claims.
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The
Merger Agreement
The following section summarizes material provisions of the
merger agreement. This summary does not purport to be complete
and may not contain all of the information about the merger
agreement that is important to you. This summary is subject to,
and qualified in its entirety by reference to, the merger
agreement, which is attached as Annex A to this joint proxy
statement/prospectus and is incorporated by reference herein.
The rights and obligations of the parties are governed by the
express terms and conditions of the merger agreement and not by
this summary or any other information contained in this joint
proxy statement/prospectus. You are urged to read the merger
agreement carefully and in its entirety before making any
decisions regarding the Merger.
The merger agreement summary is included in this joint proxy
statement/prospectus only to provide you with information
regarding the terms and conditions of the merger agreement, and
not to provide any other factual information about AMB or
ProLogis or their respective subsidiaries or businesses.
Accordingly, the representations and warranties and other
provisions of the merger agreement should not be read alone, but
instead should be read together with the information provided
elsewhere in this joint proxy statement/prospectus and in the
documents incorporated by reference herein. See Where You
Can Find More Information.
The representations, warranties and covenants contained in
the merger agreement and described in this joint proxy
statement/prospectus were made only for purposes of the merger
agreement and as of specific dates and may be subject to more
recent developments, were made solely for the benefit of the
other parties to the merger agreement and may be subject to
limitations agreed upon by the contracting parties, including
being qualified by reference to confidential disclosures, for
the purposes of allocating risk between the parties to the
merger agreement instead of establishing these matters as facts,
and may apply standards of materiality in a way that is
different from what may be viewed as material by you or other
investors. The representations and warranties contained in the
merger agreement do not survive the effective time of the
merger. Investors should not rely on the representations,
warranties and covenants or any description thereof as
characterizations of the actual state of facts or conditions of
AMB, ProLogis or any of their respective subsidiaries or
affiliates. Moreover, information concerning the subject matter
of the representations, warranties and covenants may change
after the date of the merger agreement, which subsequent
information may or may not be fully reflected in public
disclosures by AMB or ProLogis.
Form
of the Merger
The merger agreement provides that, upon the terms and subject
to the conditions set forth in the merger agreement and in
accordance with the applicable provisions of Maryland law and
the Delaware Limited Liability Company Act, AMB and ProLogis
will combine through a multi-step process:
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first, in the ProLogis merger, ProLogis will be reorganized into
an UPREIT structure by merging Pumpkin LLC with and into
ProLogis, with ProLogis continuing as the surviving entity and
as a direct wholly owned subsidiary of Upper Pumpkin and an
indirect wholly owned subsidiary of New Pumpkin;
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following the ProLogis merger, in the Topco merger, New Pumpkin
will be merged with and into AMB, with AMB continuing as the
surviving corporation under the name of ProLogis,
Inc.; and
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following the Topco merger, the combined company will contribute
all of the outstanding equity interests of Upper Pumpkin to AMB
LP, which will be renamed ProLogis, L.P., in
exchange for the issuance of partnership interests in AMB LP to
the combined company.
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Following the consummation of the Merger, ProLogis will continue
its existence as a subsidiary of the combined company. The
shares of common stock of the combined company will be listed
and traded on the NYSE under the symbol PLD.
Merger
Consideration
At the effective time of the ProLogis merger, upon the terms and
subject to the conditions set forth in the merger agreement,
(i) each outstanding ProLogis common share will be
converted into one newly issued share of common stock of New
Pumpkin, (ii) in a share exchange effected by the ProLogis
merger, each outstanding
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ProLogis Series C preferred share will be exchanged for one
newly issued share of Series C Cumulative Redeemable
Preferred Stock of New Pumpkin (which we refer to as New
Pumpkin Series C preferred stock), (iii) in a
share exchange effected by the ProLogis merger, each outstanding
ProLogis Series F preferred share will be exchanged for one
newly issued share of Series F Cumulative Redeemable
Preferred Stock of New Pumpkin (which we refer to as New
Pumpkin Series F preferred stock) and (iv) in a
share exchange effected by the ProLogis merger, each outstanding
ProLogis Series G preferred share will be exchanged for one
newly issued share of Series G Cumulative Redeemable
Preferred Stock of New Pumpkin (which we refer to as New
Pumpkin Series G preferred stock).
Pursuant to the Topco merger, upon the terms and subject to the
conditions set forth in the merger agreement, (i) each
outstanding share of New Pumpkin common stock will be converted
into 0.4464 of a newly issued share of AMB common stock,
(ii) each outstanding share of New Pumpkin Series C
preferred stock will be converted into one newly issued share of
AMB Series Q preferred stock, (iii) each outstanding
share of New Pumpkin Series F preferred stock will be
converted into one newly issued share of AMB Series R
preferred stock and (iv) each outstanding share of New
Pumpkin Series G preferred stock will be converted into one
newly issued share of AMB Series S preferred stock.
AMB will not issue any fractional shares of AMB common stock in
the Topco merger. Instead, a holder of New Pumpkin common stock
who otherwise would have received a fraction of a share of AMB
common stock will receive an amount in cash, without interest,
equal to such fractional amount multiplied by the NYSE closing
price for a share of AMB common stock on the last trading day
immediately prior to the effective time of the Topco merger.
Each share of AMB common stock and AMB preferred stock will
remain outstanding following the effective time of the Topco
merger as shares of stock of the combined company.
As a result of the Merger, each outstanding right of a limited
partner in each of ProLogis Fraser, L.P. and ProLogis Limited
Partnership I to redeem or exchange such limited partners
partnership interests therein for ProLogis common shares (or
cash equivalents thereof) will be converted into the right to
redeem or exchange such partnership interests for shares of AMB
common stock (or cash equivalents thereof) adjusted by the
exchange ratio, upon the terms and subject to the conditions set
forth in the merger agreement. Each outstanding right of a
holder of ProLogis convertible notes to convert such
convertible notes into ProLogis common shares will be converted
into the right to convert such convertible notes into shares of
AMB common stock, upon the terms and subject to the conditions
set forth in the merger agreement.
As a result of the contribution and the issuance, Upper Pumpkin
and, accordingly ProLogis, will become a wholly owned subsidiary
of AMB LP. Following the contribution and the issuance, AMB LP
shall change its name to ProLogis, L.P.
Treatment
of ProLogis Share Options and Other Equity-Based
Awards
Upon the completion of the Topco merger, each outstanding option
to purchase ProLogis common shares, whether or not then
exercisable, will be assumed by the combined company. Each such
option so assumed by the combined company will otherwise
continue to be subject to the same terms and conditions as
applicable immediately prior to the effective date of the Topco
merger, except that:
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each such option will be exercisable for that number of shares
of common stock of the combined company equal to the product of
the number of ProLogis common shares that were subject to such
option immediately prior to the Topco merger, multiplied by the
exchange ratio (0.4464) and rounded down to the nearest whole
number of shares; and
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the per share exercise price for the shares of common stock of
the combined company issuable upon exercise of such option will
be equal to the quotient determined by dividing the exercise
price of the option immediately prior to the Topco merger by the
exchange ratio (0.4464), rounded up to the nearest whole cent.
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The foregoing provisions recognize and take into account that
each ProLogis common share will, at the effective time of the
ProLogis merger, be converted into a share of New Pumpkin common
stock.
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On the effective date of the Topco merger, the following will
occur with respect to each outstanding share unit award with
respect to ProLogis common shares, dividend equivalent unit
award with respect to ProLogis common shares and performance
share award denominated in ProLogis common shares:
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each such award, whether or not then vested or earned, will be
assumed by the combined company by virtue of the Merger;
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each such award will be converted into the right to receive the
number of shares of common stock of the combined company equal
to the number of ProLogis common shares underlying or subject to
such award immediately prior to the Topco merger, multiplied by
the exchange ratio (0.4464) and rounded down to the nearest
whole number of shares; and
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each such award will otherwise continue to be subject to the
same terms and conditions as applicable immediately prior to the
Topco merger effective date.
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The foregoing provisions recognize and take into account that
each ProLogis common share will, at the effective time of the
ProLogis merger, be converted into a share of New Pumpkin common
stock.
The ProLogis board of trustees has agreed to adopt such
resolutions and take such other actions as may be required to
provide that with respect to ProLogis Employee Stock
Purchase Plan:
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participants may not increase their payroll deductions under
such plan from those in effect on January 30, 2011, the
date of the merger agreement;
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no new participants may join such plan following
January 30, 2011;
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all participation in, and purchases under such plan will be
suspended effective as of the earlier of June 30, 2011 or
ProLogis payroll period ending immediately prior to the
closing of the Topco merger, but in no event less than ten
business days prior to the closing of the Topco merger (we refer
to this date as the suspension date), such that the
offering period in effect as of January 30, 2011, the date
of the merger agreement, will be the final offering period under
the plan until otherwise determined by the board of directors of
the combined company; and
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with respect to any offering period under such plan in effect as
of January 30, 2011, ProLogis will ensure that such
offering period ends on the suspension date and that each
participants accumulated contributions for such offering
period will be applied to the purchase of ProLogis common shares
in accordance with the terms of the plan.
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Any cash remaining in ProLogis Employee Share Purchase
Plan after the purchases occurring on the suspension date will
be promptly refunded to participants.