SAN FRANCISCO–Prologis is acquiring rival industrial REIT DCT Industrial Trust in a stock-for-stock deal for $8.4 billion. The deal, which boards of directors for both companies have approved, comes as e-commerce activity is driving industrial demand to new heights.

BTIG estimates that the deal represents “$67.91/sh” for DCT's stock, a 15.6% premium over market close on Friday, April 27. It also estimates the implied cap rate on the transaction at 4.3% to 4.5%, which is 40 to 60 basis points lower than its most recent NAV estimate. BTIG analysts write that while the rationale makes sense — portfolio overlap, last-mile/infill focus, strong development platform — “Prologis offered a sizeable premium (26.3x 2018 FFO/sh) in an already aggressively priced sector.”

Complementary Portfolios

Denver-based DCT Industrial Trust's 71 million square foot operating portfolio will expand Prologis' presence in Southern California, the San Francisco Bay Area, New York/New Jersey, Seattle and South Florida. Prologis chairman and chief executive officer Hamid R. Moghadam said the REITs' respective portfolios are very complementary and will allow Prologis “to capture significant scale economies immediately.”

In addition, he said, “our current platform initiatives, particularly in the areas of advanced analytics, customer experience and procurement and ancillary revenues, will enable us to extract significant upside from the combined portfolios.”