On 4 August 2026, Prologis and SEGRO announced the terms of a recommended offer valuing SEGRO’s issued and to be issued ordinary share capital at approximately £14.0 billion on the reference assumptions used in the transaction documents.

The scale is notable. The structure is more instructive.

The default consideration is 0.0920 new Prologis shares for each SEGRO share. SEGRO shareholders may instead elect to receive cash for part or all of their entitlement, but the aggregate cash pool is capped at approximately £3.5 billion. A basic election equal to 25 per cent of the fixed reference price would deliver 258 pence in cash and 0.0690 Prologis shares for each SEGRO share. Elections above that basic entitlement may be scaled back if demand for cash exceeds the cap.

This is neither a conventional all-share merger nor a fixed cash acquisition. It is an allocation mechanism.

The structure determines how price volatility, sterling-dollar movements, financing capacity, shareholder preferences and future participation in the combined group are distributed. It also illustrates a wider principle in cross-border M&A: consideration is part of the industrial architecture of a transaction, not an appendix to valuation.

The exchange ratio transfers part of the valuation debate into the market

A fixed exchange ratio establishes how ownership will be divided. It does not fix the sterling value that a SEGRO shareholder will ultimately receive.

The transaction documents make that distinction visible. Using Prologis’ closing share price and the GBP:USD exchange rate on 21 July 2026, the agreed reference price was 1,031.7 pence per SEGRO share. Using the market inputs on 3 August, the implied value was 998.1 pence.

The exchange ratio had not changed. The value expressed in sterling had.

That movement is not a flaw in the structure. It is the economic consequence of using listed shares as the principal currency. SEGRO shareholders retain exposure to the price of Prologis shares and to the relevant exchange rate through completion and, for those who remain invested, beyond it.

For an acquirer, stock consideration can preserve cash and share integration risk with the sellers. For target shareholders, it can preserve participation in future benefits that would otherwise be sold for a fixed amount. But it also means that part of the consideration remains exposed to variables neither board can control.

The practical question is therefore not simply whether the exchange ratio represents an attractive premium on one reference date. It is whether the ownership proposition remains coherent across a range of share-price and currency outcomes.

The partial cash alternative creates choice—but not unlimited liquidity

The cash alternative gives SEGRO shareholders a degree of election. It does not turn the offer into an uncapped cash exit.

The maximum cash amount is approximately £3.5 billion. Shareholders can request less or more than their basic entitlement, but excess elections may be reduced pro rata if total demand exceeds the available pool. Those who make no cash election receive the default 0.0920 Prologis shares.

This mechanism serves several purposes at once.

It gives shareholders with different mandates, liquidity needs or appetite for US-listed equity a route to adjust their exposure. It limits the acquirer’s cash requirement. It also lets the final ownership split respond, within a defined range, to shareholder elections.

According to Prologis’ filing, SEGRO shareholders would own approximately 11.5 per cent of the combined group if no cash elections were made, and approximately 8.9 per cent if the partial cash alternative were fully taken up. The election process therefore changes more than the payment mix. It changes the post-transaction shareholder base.

For boards designing a similar structure, flexibility must be analysed from both sides. An election mechanism may improve acceptability, but it can introduce uncertainty over cash demand, ownership, scaling and investor composition. The cap is what makes the option financeable; the scale-back is what prevents it from becoming a promise the acquirer cannot control.

Financing the cash component is part of execution, not a closing detail

Prologis stated that the cash consideration would be funded through a committed term loan facility, existing liquidity and other available sources. The related credit agreement permits borrowings in sterling or euros of up to £3.575 billion.

On the same day as the recommended offer was announced, Prologis priced an underwritten public offering of 15 million common shares, expected to generate approximately $2.1 billion of gross proceeds for general corporate purposes, with potential acquisitions such as SEGRO cited among the possible uses.

The equity raise and the term facility should not be treated as interchangeable with the consideration formula. They are components of the acquirer’s broader funding architecture. Together, however, they show that transaction certainty depends not only on agreeing a price but on matching the form of payment with credible capital access.

A capped cash alternative can protect the balance sheet only if the cap, facilities, liquidity and market issuance capacity have been designed together. Otherwise, optionality offered to target shareholders can become financing uncertainty for the bidder.

This is particularly important in real-estate combinations, where ratings, leverage, asset-level financing, development commitments and joint-venture capital can all interact with acquisition funding.

The listing choice supports the consideration choice

Prologis intends to seek a secondary listing of its common shares on the London Stock Exchange, and approval of that admission is a condition to completion. The new shares issued as consideration must also be approved for listing on the New York Stock Exchange.

The London listing is not cosmetic. It helps address a structural question created by a cross-border share offer: how will target shareholders hold and trade the bidder’s equity after completion?

Market access, settlement, index eligibility, mandate constraints and investor familiarity can influence whether stock consideration is genuinely usable for the receiving shareholder base. A share may have economic value but still be an awkward acquisition currency if the target’s investors cannot hold or trade it efficiently.

The proposed dual-market access is intended to support the consideration architecture. It does not eliminate currency or share-price risk, but it can reduce operational friction around the security being delivered.

Dividends and time are also part of price

The transaction permits SEGRO shareholders to receive and retain specified 2026 dividends without reducing the offer consideration. The documents also contemplate permitted 2027 dividends if the timetable extends.

This matters because a transaction expected to complete in the first half of 2027 leaves a meaningful period between announcement and closing. During that interval, shareholders remain exposed to the target’s operating performance and to the opportunity cost of waiting.

Dividend treatment is one way to allocate that timing value. Interim operating covenants, conditions, long-stop dates and termination rights allocate other parts of the same risk.

The transaction is to be effected through a UK court-sanctioned scheme of arrangement. It remains subject to SEGRO shareholder approvals, court sanction, regulatory and antitrust clearances, listing approvals and other conditions. Prologis shareholder approval is not required. Completion is an expected outcome, not a current fact.

The lesson is broader than this transaction. Headline consideration cannot be analysed separately from the period in which the deal is conditional. Value can move while the exchange ratio remains fixed; dividends may continue; financing costs can accrue; market conditions can change; approvals may alter timing or economics.

Five questions for boards designing cross-border consideration

The Prologis–SEGRO structure suggests five questions that are useful well beyond real estate.

1. Which risks should sellers continue to own?

Stock consideration lets target shareholders participate in the combined company, but it also transfers share-price, currency and integration exposure to them. The ownership proposition should be tested under upside and downside scenarios, not only at the announcement price.

2. How much liquidity should the transaction offer?

A cash election can accommodate different shareholder needs. Its cap, entitlement rules and scale-back mechanics must be understandable, financeable and aligned with the desired post-deal ownership structure.

3. Can the acquirer fund the maximum election without weakening the strategic case?

Committed facilities, existing liquidity, equity issuance capacity and rating objectives should be considered together. The maximum cash scenario—not the expected election—should anchor the funding test.

4. Is the security being offered usable by the target’s investors?

Listing venue, settlement, currency, mandates and index consequences can determine whether a share offer functions in practice. Cross-border consideration needs a market-access plan as well as an exchange ratio.

5. What happens to value while the transaction remains conditional?

Dividend rules, interim conduct, regulatory remedies, long-stop dates and termination provisions determine who bears the cost of time and uncertainty.

Price is a number; consideration is a system

The most sophisticated feature of a transaction is not always the headline valuation. It may be the mechanism that allows different stakeholders to carry different forms of risk without destabilising the financing or the ownership logic.

In the Prologis–SEGRO proposal, the fixed exchange ratio preserves stock participation. The partial cash alternative introduces bounded liquidity. The financing package supports the maximum cash commitment. The proposed London listing makes the equity consideration more accessible to the target’s shareholder base. Dividend permissions and conditions allocate the value of time until completion.

None of these elements guarantees that the proposed combination will complete or achieve the benefits described by the companies. They do show what a well-developed consideration architecture is designed to do: convert a valuation agreement into an executable allocation of ownership, liquidity, market exposure and closing risk.

That is why the consideration is the strategy. The price tells shareholders what the transaction is worth on a chosen date. The consideration structure tells them what they will own, what they may receive in cash and which risks they will still carry when the date has moved on.

References and further reading

This article is provided for general information only. It does not constitute investment, legal, tax, regulatory or transaction advice, and it is not a recommendation regarding the proposed offer or any shareholder election.