April 27, 2011 / 9:04 PM / 6 years ago

UPDATE 2-Investor says ProLogis offer for PEPR too low

* Investor says ProLogis offer too low

* ProLogis shares close down 1 cent (Adds CEO comment, Fir Tree comment, background, byline)

By Ilaina Jonas

NEW YORK, April 27 (Reuters) - A hedge fund with a 4.3 percent stake in ProLogis' (PLD.N) publicly traded European fund said the price ProLogis has offered for ProLogis European Properties FCP (PEPR) PEPR.AS is unfairly low.

In a letter to Walter Rakowich, the chief executive of warehouse and distribution center owner ProLogis, Fir Tree Partners argued on Wednesday that ProLogis' offer of 6.10 euros per share falls short of ProLogis' own estimate of the value of PEPR's properties of 6.32 euros per share.

Fir Tree said in the letter that even that estimate undervalued the property. Fir Tree has $6.5 billion of assets under management.

PEPR owns some of the highest quality warehouse and distribution centers in key markets of France, the UK, Central Europe, Italy and Spain, according to research firm Green Street Advisors.

"Given the improvement of the global economy and the fact that very little new supply has been created in the last three years, we anticipate that going forward PEPR will realize outsized rental growth compared to the market as a result of its shorter lease breaks," Fir Tree director Aman Kapadia wrote in the letter.

"A fair offer should compensate unit holders for giving up this future growth," he wrote.

Denver-based ProLogis raised its stake in PEPR to 38 percent from 33 percent, which triggered a mandatory tender offer for the shares it did not own. The tender offer expires May 6.

ProLogis was prompted to act after Dutch pension manager Algemene Pension Groep NV and Australian warehouse and distribution center owner Goodman Group (GMG.AX) offered 6 euros per share.

"I think this is a standard hedge fund tactic to drive up price," Rakowich told Reuters. "This is a tender offer, not a take over. No unit holder is required to tender."

ProLogis spun off the fund in an initial public offering in 2006 and controls the board. It also manages the fund and receives fees for doing so.

ProLogis has said that its offering price represents a 22 percent premium over PEPRs share price. But Fir Tree argued that PEPR's price has been artificially deflated because it has not reinstated a regular dividend.

If it does not receive what it considers a fair price, Fir Tree said it would appeal to the Commission de Surveillance du Secteur Financier and the Authority for the Financial Markets, to determine a "fair price for the units."

However, Rakowich said the Commission de Surveillance du Secteur Financier already has approved its offer.

ProLogis is about to merge with AMB Property Corp AMB.N. (Reporting by Ilaina Jonas) (Reporting by Ilaina Jonas; editing by Andre Grenon)

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