Item 1.01
|
Entry into a Material Definitive Agreement.
|
On April 29, 2018, DCT Industrial
Trust Inc., a Maryland corporation (DCT), and DCT Industrial Operating Partnership LP, a Delaware limited partnership (the Partnership and, together with DCT, the DCT Parties), entered into an Agreement and Plan
of Merger (the Merger Agreement) with Prologis, Inc., a Maryland corporation (Prologis), and Prologis, L.P., a Delaware limited partnership (Prologis OP and, together with Prologis, the Prologis
Parties). Upon the terms and subject to the conditions set forth in the Merger Agreement, (a) the Partnership will merge with and into Prologis OP, with Prologis OP surviving the merger (the Partnership Merger) and
(b) immediately following the Partnership Merger, DCT will merge with and into Prologis, with Prologis surviving the merger (the Company Merger and, together with the Partnership Merger, the Mergers). The board of
directors of DCT (the DCT Board) has unanimously approved the Merger Agreement, the Mergers and the other transactions contemplated by the Merger Agreement.
At the effective time of the Company Merger (the Company Merger Effective Time), each share of common stock, par value $0.01 per
share, of DCT (DCT Common Stock) issued and outstanding immediately prior to the Company Merger Effective Time (other than DCT Common Stock owned by any of the DCT Parties or any of DCTs wholly-owned subsidiaries and DCT Common
Stock owned by any of the Prologis Parties or any of their respective wholly-owned subsidiaries) shall automatically be converted into the right to receive 1.02 (the Exchange Ratio) validly issued, fully paid and
non-assessable
shares of common stock, par value $0.01 per share, of Prologis (Prologis Common Stock, and such consideration, the Merger Consideration), together with cash in lieu of
fractional shares, without interest, but subject to any withholding required under applicable tax law, upon the terms and subject to the conditions set forth in the Merger Agreement. The Company Merger is intended to qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
At the effective
time of the Partnership Merger (the Partnership Merger Effective Time), (a) the general partner interests in the Partnership (other than the limited partnership interests of the Partnership (Partnership OP Units) held by DCT,
which shall be converted as set forth below) will be canceled and no payment shall be made with respect thereto, and (b) each issued and outstanding Partnership OP Unit (including any Partnership OP Unit issued upon the conversion of limited
partnership interests in the Partnership granted under the company equity incentive plan and designated as an LTIP Unit under the partnership agreement of the Partnership (Company LTIP Units)) prior to the Partnership Merger
Effective Time shall automatically be converted into a number of new validly issued limited partnership interests in Prologis OP (New OP Units) in an amount equal to the Exchange Ratio, and each holder of New OP Units shall be admitted
as a limited partner of Prologis OP following the Partnership Merger Effective Time in accordance with the terms of the Prologis OP partnership agreement. Any fractional New OP Unit that would otherwise be issued to any holder of Partnership OP
Units shall be rounded up to the nearest whole number and the holders of Partnership OP Units shall not be entitled to any further consideration with respect thereto. The Partnership Merger is intended to qualify as and constitute an
assets-over form of merger under Treasury Regulations
Section 1.708-1(c)(3)(i),
with Prologis OP being the continuing partnership pursuant to Treasury Regulations
Section 1.708-1(c)(1).
In addition, (a) immediately prior to the Partnership Merger Effective
Time, each issued and outstanding (i) unvested Company LTIP Unit will automatically become fully vested in accordance with the existing award agreements and (ii) vested Company LTIP Unit eligible for conversion into a Partnership OP Unit prior to or
at the Partnership Merger Effective Time shall automatically be converted into a Partnership OP Unit pursuant to the partnership agreement of the Partnership, (b) at the Partnership Merger Effective Time, each issued and outstanding Company LTIP
Unit not eligible to be converted into a Partnership OP Unit, if any, will automatically be converted into limited partnership interests designated as an LTIP Unit in the Prologis OP partnership agreement (Parent LTIP Units)
in an amount equal to the Exchange Ratio, with any fractional Parent LTIP Unit that would otherwise be issued to any holder of Company LTIP Units being rounded up to the nearest whole number and the holders of Company LTIP Units not being entitled
to any further consideration with respect thereto, (c) immediately prior to the Company Merger Effective Time, each share of DCT Common Stock subject to a restricted stock award shall fully vest in accordance with the existing award agreements and
shall be cancelled and converted automatically into the right to receive the Merger Consideration in respect of each such share of DCT Common Stock, (d) at the Company Merger Effective Time, each phantom share of DCT outstanding
immediately prior to the Company Merger Effective Time shall fully vest in accordance with the existing award agreements and shall be cancelled and converted automatically into the right to
receive the Merger Consideration in respect of each share of DCT Common Stock underlying such phantom share, and (e) at the Company Merger Effective Time, each outstanding and unexercised option to purchase DCT Common Stock granted under
DCTs equity incentive plan will fully vest and terminate and shall be converted into the right to receive a number of shares of Prologis Common Stock, determined as of such time, equal to (i) (A) the number of shares of DCT Common Stock
that were subject to such option immediately prior to the Company Merger Effective Time
multiplied
by (B) the excess, if any, of the fair market value of a share of DCT Common Stock determined immediately prior to the Company Merger
Effective Time over the per share exercise price of the option, rounded down to the nearest whole number of shares of Prologis Common Stock,
multiplied
by (ii) the Exchange Ratio.
The consummation of the Mergers is subject to certain closing conditions, including (a) the approval of the Company Merger by the holders
of a majority of the shares of outstanding DCT Common Stock, (b) the shares of Prologis Common Stock to be issued in the Company Merger will have been approved for listing on the New York Stock Exchange, (c) the Form
S-4
filed by Prologis in connection with the Mergers being declared effective, (d) the absence of any temporary restraining order, injunction or other legal order, and no change in law being enacted, which
would have the effect of making illegal or otherwise prohibiting preventing the consummation of the Mergers, (e) the receipt of certain legal opinions by Prologis and DCT and (f) other customary conditions specified in the Merger
Agreement.
The Merger Agreement contains customary representations, warranties, agreements and covenants, including covenants providing
that each of the Prologis Parties and the DCT Parties will conduct their respective businesses in all material respects in the ordinary course, consistent with past practice, during the period between the execution of the Merger Agreement and the
earlier of the Partnership Merger Effective Time or the termination of the Merger Agreement. Specifically, neither DCT nor the Partnership can take certain specified actions without Prologiss prior written consent (not to be unreasonably
withheld, delayed or conditioned), including, among other things (subject to certain exceptions) (a) paying any dividends or issuing any stock, (b) making any loans or incurring any indebtedness, (c) settling certain litigation,
(d) making capital expenditures not in accordance with DCTs capital expenditure plan, or (e) taking any action, or failing to take any action, that would reasonably be expected to cause (i) DCT or DCT Industrial Value Fund I,
Inc. to fail to qualify as a REIT or (ii) any Company subsidiary to cease to be treated as a partnership or disregarded entity for federal income tax purposes or a qualified REIT subsidiary or a taxable REIT subsidiary.
Each of Prologis and DCT have agreed not to make, declare or set aside any dividend or other distribution to its respective stockholders
without the prior written consent of the other party, except that upon written notice to the other party, (a) DCT may authorize and pay (i) quarterly distributions at a rate not in excess of $0.36 per quarter and (ii) the regular
distributions that are required to be made in respect of the Partnership OP Units and Company LTIP Units in connection with any dividends paid on the DCT Common Stock and (b) Parent may authorize and pay (i) quarterly distributions at a
rate not in excess of $0.44 per quarter and (ii) the regular distributions that are required to be made in respect of the limited partnership interests in Prologis OP in connection with any dividends paid on the Prologis Common Stock.
Prologis has also agreed, effective as of the Company Merger Effective Time, to increase the Prologis board of directors by one member and
appoint a person designated by DCT to serve as a director until 2019, at which time such person shall then be nominated by the Prologis board of directors for reelection at its 2019 annual meeting of stockholders. It is anticipated that Philip L.
Hawkins, President and Chief Executive Officer of DCT, will be appointed to hold the new board seat on the Prologis board of directors as of the Company Merger Effective Time.
DCT has agreed not to (a) solicit proposals relating to certain alternative transactions, (b) enter into discussions or negotiations
or provide
non-public
information in connection with any proposal for an alternative transaction from a third party or (c) approve or enter into any agreements providing for any such alternative
transaction, subject to certain exceptions to permit members of DCTs board of directors to comply with their duties as directors under applicable law. Notwithstanding these
no-shop
restrictions, prior to obtaining the DCT stockholder approval, under specified circumstances DCTs board of directors may change its recommendation of the transaction, and DCT may also terminate the Merger Agreement to accept a superior
proposal upon payment of the termination fee described below.
The Merger Agreement may be terminated under certain circumstances, including by either Prologis
or DCT if the Mergers have not been consummated on or before December 31, 2018, if a final and
non-appealable
order is entered enjoining or otherwise prohibiting the Mergers, or if the DCT stockholders
shall have voted at the special meeting held to consider the approval of the Company Merger and the Company Merger is not approved.
The
Merger Agreement provides that, in connection with the termination of the Merger Agreement under specified circumstances, DCT may be required to pay to Prologis a termination fee of $216 million or reimburse Prologiss transaction expenses
up to an amount equal to $15 million. However, the termination fee payable by DCT to Prologis will be $100 million if the Merger Agreement is terminated before the end of the Window Period End Time by (a) DCT in order for
DCT to accept a superior proposal from a Qualified Bidder or (b) Prologis because the DCT board of directors changed its recommendation that the DCT stockholders approve the Company Merger as the result of a superior proposal from a
Qualified Bidder. Under the terms of the Merger Agreement, a Qualified Bidder is a bidder that shall have delivered an acquisition proposal on or prior to 11:59 p.m. (New York time) on May 29, 2018 with respect to which,
on or prior to such date, the DCT board of directors determined in good faith (after consultation with its outside legal counsel and its financial advisors) constituted or would reasonably be expected to lead to a superior proposal. In addition, the
term Window Period End Time in the Merger Agreement means, with respect to a Qualified Bidder, the later of (i) 11:59 p.m. (New York time) on June 13, 2018 and (ii) one day after the end of a required notice period with
respect to a superior proposal by such Qualified Bidder provided that such notice period (as may be extended) began on or prior to 11:59 p.m. (New York time) June 13, 2018.
The foregoing summary of the Merger Agreement does not purport to be a complete description and is qualified in its entirety by the full text
of the Merger Agreement, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.
The Merger Agreement has been
included to provide investors with information regarding its terms. It is not intended to provide any other factual information about DCT, the Partnership or their respective subsidiaries or affiliates. The representations and warranties contained
in the Merger Agreement were made only for purposes of the Merger Agreement and as of specific dates, are solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties (including
being qualified by confidential disclosures made by the parties), may have been made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to
standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries to the representations and warranties contained in the Merger Agreement and should not rely on
the representations and warranties or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject
matter of representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in DCTs or the Partnerships public disclosures.