ProLogis buys rival Catellus to become largest DC developer

By Susan E. Francis -- Logistics Management, 7/1/2005

DENVER—ProLogis, a global provider of distribution facilities and services, will purchase Catellus Development Corporation, a rival real estate developer, in a $4.9 billion transaction that should be completed by the end of this year.

Denver-based ProLogis will gain real estate in key U.S. markets while Catellus' customers will benefit from ProLogis' presence in Europe and Asia.

The companies said the deal will make ProLogis the world's largest developer of distribution facilities, with more than 350 million square feet of space in 75 markets.

Although it's uncertain how the deal will impact the North American market, observers expect pricing to remain fairly stable. "[How this changes] pricing is going to be tough to tell," says Arnold Maltz, associate professor of logistics and supply chain management at Arizona State University. "I don't think that it's going to be enough to swing pricing, but ProLogis is a lot bigger than anyone else right now."

John Porter, senior vice president of developer CB Richard Ellis Logistics, agrees that the acquisition gives Pro-Logis enormous reach. But demand for distribution services is growing, and he doesn't expect the company will completely dominate the market. "There will still be other competitors and players," he says.

The international impact of the merger seems clearer. ProLogis has rapidly expanded in Europe and Asia in order to give its U.S. clients access to both domestic and international markets. With the Catellus acquisition, ProLogis will have more options to offer its growing number of foreign clients, observes Maltz. "It's going to be a lot easier for companies—especially overseas companies—to set up networks in the U.S.," he says.

ProLogis executives say they expect the merger to increase the company's growth rate by 3 to 5 percent through 2006. That expansion will change the way ProLogis does business, says Maltz, who expects the company will increasingly contract to provide multiple services for large clients. This would be a change from the individual need-based deals the firm typically does now.

Smaller shippers looking for distribution facilities and services could be at a disadvantage when dealing with the newly expanded ProLogis. Maltz, for one, thinks that smaller companies could address that situation by working together to gain purchasing power.