London Loses Again: FTSE 100 Landlord Segro Will Be Missed

The decision by FTSE 100 warehouse landlord Segro to recommend a “best and final” offer of £14 billion from US giant Prologis is a significant blow to London’s stock market. Despite having put up a decent fight, the company has ultimately succumbed to the takeover bid.

Prologis initially offered £9.6 billion for Segro in what has been a months-long process. However, David Sleath, Segro’s long-serving chief executive, had argued that the company’s unique portfolio of European logistics assets was worth far more than its current valuation. He cited near-£18 billion within a few years on a standalone basis, thanks to growth opportunities in datacentres and big-box warehouses for online retailers.

Norway’s sovereign wealth fund, which holds an 8% stake in Segro, called for “engagement” with Prologis, sparking questions about the fairness of the deal. Many institutional investors also have holdings in Prologis, which has a massive £101 billion market capitalization, further complicating matters.

The takeover’s impact on London’s real estate sector cannot be overstated. Segro is not only the largest listed commercial landlord but also offers direct exposure to UK and European datacentre and logistics development – something that will now be absorbed into Prologis’s global platform. This loss of diversity in the London stock market is a worrying trend, particularly given the increasing dominance of overseas firms with richer valuations.

While some may argue that this takeover reflects the changing landscape of international business and finance, it’s hard to see it as anything other than another nail in the coffin for London’s independence. The city has long been an attractive destination for investors, but its stock market has become increasingly vulnerable to overseas firms looking to expand their portfolios.

Prologis has promised a secondary listing in London, which may provide some consolation. However, experience shows that these add-on listings rarely last, with trading inevitably gravitating towards the US and leaving UK investors with limited access.

In the end, Segro’s fall to Prologis is not just about the loss of a company; it’s also about the erosion of London’s ability to compete with other global financial centers. As one analyst noted, “Investors lose the ability to choose UK/European datacentre and logistics growth specifically, and instead inherit whatever weighting Prologis’s management chooses to give the UK and Europe within a global platform.”

The hollowing-out of the UK stock market has become a worrying trend in recent years, with overseas firms snapping up domestic companies at increasingly attractive prices. This takeover is another reminder that London’s independence and competitiveness are being slowly eroded – a process that should be of concern to policymakers and investors alike.

As Segro becomes part of Prologis’s global empire, it will be interesting to see how the latter company navigates its new European assets. Will Prologis prioritize growth in these markets, or will it focus on integrating them into its existing operations? The answer could have significant implications for UK investors and policymakers who are keen to preserve London’s competitiveness.

Moreover, this takeover raises questions about the role of institutional investors in shaping the UK’s stock market. Are they more concerned with short-term gains than long-term potential, or do they genuinely believe that these companies will thrive under foreign ownership? The answers to these questions could have far-reaching implications for the future of London’s stock market.

Segro’s fall to Prologis is a stark reminder that London’s independence and competitiveness are being slowly eroded. As policymakers and investors look to preserve the city’s status as a global financial center, they would do well to take note of this takeover – and think carefully about what it means for the future of UK business and finance.