Segro, one of the UK's largest commercial property landlords, has firmly rebuffed a £12.6 billion takeover proposal from US rival Prologis, deeming its 925p per share offer woefully inadequate. This swift rejection highlights the chasm between the perceived worth of UK assets and their actual value in the eyes of global investors.
Segro's portfolio spans over 7 million sq m across the UK and Europe, with a significant focus on warehouses and logistics centres – prime targets for online retailers seeking to expand their operations. Notably, AI data centres now account for 8% of Segro's portfolio but represent an increasingly larger proportion of its development pipeline, particularly in the space-constrained South East.
Despite delivering an impressive compound growth rate of 8% over the past decade across key metrics – asset value, earnings per share, and dividends – Segro shares have traded at a 25% discount to their true worth prior to Prologis's approach. This persistent undervaluation, averaging 17% over three years, is attributed in part to broader market fluctuations and shifting interest rate expectations.
Prologis's all-share offer aimed to entice Segro shareholders with access to a larger, globally diversified company, but its proponents overlooked the distinct advantages of Segro's UK-centric focus, which includes dedicated exposure to AI growth opportunities. Industry analysts such as Shore Capital now recommend that shareholders resist this bid unless it is significantly upgraded.
Meanwhile, Panmure Liberum has highlighted the importance of Prologis's pursuit of Segro, viewing it as a testament to the company's long-term value. This endorsement could help bolster Segro's valuation, even in the event of an unsuccessful takeover attempt.
This episode underscores ongoing concerns about UK companies' valuations and whether domestic entities are adequately appreciating their own assets. As US firms continue to identify opportunities, UK boards and shareholders must work together to ensure any potential sales reflect the full strategic and growth potential of their companies.