Macquarie ProLogis announces recommended cash offer from ProLogis

Macquarie ProLogis Management Limited ("MPML"), the responsible entity of Macquarie ProLogis Trust (ASX:MPR) ("MPR"), and ProLogis (NYSE:PLD) announced on 17 April 2007 that they have entered into an Implementation Agreement in relation to a proposed issue of units in MPR to a member of the ProLogis Group and redemption of all of the units in MPR (other than those held by the ProLogis Group) involving a total cash payment to Unitholders of A$1.24 billion ("the Proposal"). 

Important Documents

• Notice of Meeting (pdf 29KB)
• Explanatory Memorandum to MPR Unitholders (pdf 5.13MB)
• Implementation Agreement (pdf 204KB)
• Supplemental Deed Poll (pdf 22.9KB)

The Explanatory Memorandum is an important document and requires the attention of Unitholders. If you are a Unitholder, you should read it in its entirety and if you are in doubt as to what you should do, you should contact your investment or other professional adviser.

The cash offer

If the Proposal is implemented, Unitholders will recieve a payment of A$1.43 in respect of each Unit they hold, consisting of a special distribution of income arising from the realised value of derivatives held by MPR and Macquarie ProLogis Income Trust (ASX: MPN) ("MPIT") (currently estimated at 10.41 cents per Unit based on market conditions as at 11 May 2007) and the balance as consideration for redemption of the Unit⁽¹⁾.  Unitholders will then cease to hold an interest in MPR, which will subsequently be delisted from ASX.  

Independent Directors' recommendation

The Independent Expert (Grant Samuel & Associates Pty Ltd) believes that the Proposal is fair and reasonable to, and in the best interests of, Unitholders. A copy of the Independent Expert's Report can be found in Section 6 of the Explanatory Memorandum.

The MPML Independent Directors unanimously recommend that Unitholders vote in favour of each of the resolutions in connection with the Proposal in the absence of a superior offer.

The Macquarie representatives on the Board of MPML, having reviewed the Proposal, support the Proposal and therefore the recommendation of the MPML Independent Directors.

Rationale for Unitholders

The MPML Independent Directors believe that, given the limited opportunities for growing returns (for the reasons outlined below), the Proposal represents the best way to deliver value for Unitholders.

• Difficulty in making earnings accretive aquisitions: significant increases in the value of industrial property in North America in recent times have meant that MPR has encountered difficulty in making earnings accretive acquisitions.
• Expiration of exclusive access to ProLogis development pipeline: exclusive access to the ProLogis Group’s North American development pipeline via a right of first offer, which was a key part of MPR’s strategy from inception, expired at the end of 2005 and was not renewed.
• Increased value of Australian dollar: MPR’s potential for future earnings growth in Australian dollars has been adversely impacted by changes in foreign exchange rates over time.
• Limited strategic alternatives: In light of the above, MPML has considered other strategic alternatives to generate growth in returns, and has determined that the Proposal represents the best way to deliver value to Unitholders.

The payment of A$1.43 per Unit represents:

• an annualised total return of 15.3 per cent since listing on the ASX on 26 June 2002 (assuming the expected Implementation Date of 11 July 2007);
• an 11 per cent premium to MPR’s volume weighted average Unit price of A$1.29 for the one month period prior to announcement of the Proposal on 17 April 2007, and a 12 per cent premium to MPR’s volume weighted average Unit price of A$1.28 for the six month period prior to the announcement of the Proposal;
• a 35 per cent premium to the adjusted net tangible assets per unit (including deferred US tax liabilities per Unit) of A$1.06; and
• a 12 per cent premium to the adjusted net tangible assets per unit (excluding deferred US tax liabilities) of A$1.27⁽²⁾.

Payment of distributions

As the Proposal is expected to be implemented after 1 July 2007 and before 30 September 2007:

• Unitholders who hold Units as at 29 June 2007 will receive their regular distribution for the quarter ending 30 June 2007, of at least 2.00 cents per Unit; and
• in respect of the period from 1 July 2007 until the Implementation Date, Unitholders who hold Units as at the Record Date, will receive an amount per Unit equal to that proportion of 2.00 cents which the number of days from 1 July 2007 up to and including the Implementation Date bears to the total number of days in the quarter ending 30 September 2007. Based on the expected Implementation Date of 11 July 2007, the amount of such distribution will be 0.23 cents per Unit.

Redemption of SHEDS

If the Proposal is implemented, all the Step-up Hybrid Exchangeable Distributing Securities ("SHEDS") in MPIT will be redeemed at the cash consideration of A$103.09 for each SHEDS plus any Unpaid Distribution Amount. For more information refer to the MPIT website at www.macquarie.com.au/au/property/mpn.

Sale to ProLogis of Macquarie's interest in US Manager

If Unitholders approve the Proposal, the 50% interest in Macquarie ProLogis Management LLC ("US Manager"), which owns all of the shares in MPML, held by Macquarie Real Estate Inc. will be purchased by an affiliate of ProLogis for US$22 million.  The Proposal is not conditional upon this arrangement.

Action required by Unitholders

Step 1 - Read the Notice of Meeting and Explanatory Memorandum

The Explanatory Memorandum sets out the details of the Proposal. It also includes the Independent Expert's Report prepared by Grant Samuel & Associates Pty Ltd and a Tax Report prepared by Greenwoods & Freehills Pty Ltd.

Step 2- Vote on the Resolutions

You can vote on the resolutions either by attending the Unitholders' Meeting (details of the Unitholders' Meeting are set out below) in person or by lodging the Proxy Form accompanying the Explanatory Memorandum. Proxy Forms should be completed, signed and received by 10:00 am, 25 June 2007 to:

Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Facsimile: 02 9287 0309; or

Macquarie ProLogis Management Limited
Level 15, No. 1 Martin Place
Sydney NSW 2000
Facsimile: 02 8232 6510

Unitholders' Meeting

If you wish to attend the meeting please RSVP before close of business on Friday, 22 June 2007 by emailing propfunds@macquarie.com or by contacting Macquarie by telephone on 1300 365 585 (local call cost) between 9:00 am and 5:00 pm, Monday to Friday, to assist with planning and catering.

Key dates

All dates following the Unitholders' Meeting are indicative only and are subject to the satisfaction of the conditions precedent to the implementation of the Proposal.

Announcement

• ASX release
• Presentation (pdf 84KB)
• Webcast (39 mins 38 secs)

Unitholder enquiries

If you have any queries about the Proposal, voting, proxies or the Unitholders' Meeting, please contact Link Market Services Limited on 1300 880 467 (local call cost within Australia) or +61 2 8280 7494 (outside Australia) or email registrars@linkmarketservices.com.au.

For any other information about the Proposal, please consult your investment or other professional adviser.

Frequently Asked Questions

Click here to view the Frequently Asked Questions section (pdf 50.8KB)

⁽¹⁾  If any Australian tax is required to be withheld by MPR as a result of a distribution of income to a Unitholder, the  amount of of Australian tax will be deducted from the distribution.
⁽²⁾ Refer to the Explanatory Memorandum for calculation of adjusted net tangible assets per Unit.