A blue chip deal inside this blue chip REIT merger…

Ever since Monday, when the proposed “merger of equals” between real estate investment trusts ProLogis (PLD) and AMB Property Corporation (AMB) was announced, ProLogis has filed 20 documents with the Securities and Exchange Commission (including the earnings report it filed just this morning), and AMB has filed another 12. The deal – expected to close in the second quarter of 2011 – will create a company with a real estate portfolio of about 600 million square feet and a total market cap of more than $24 billion.

According to Walter C. Rakowich, ProLogis’ CEO, there is “…an achievable plan to put these companies together seamlessly.” In the same document (Exhibit 99.1 to this Jan. 31 8-K), AMB’s CEO, Hamid R. Moghadam, predicted that the union will create “…a company positioned to be the leading global provider of logistics real estate — a Blue Chip REIT,” adding that the new company will “be a global player active on four continents.”

The companies haven’t filed their merger proxy yet, so we’ll have to wait to learn how ProLogic’s and AMB’s officers and directors will fare if the deal closes. But from the SEC filings submitted so far, it looks like this “Blue Chip REIT” is producing a blue chip opportunity for Rakowich, as well. Along with Moghadam, Rakowich will serve as the co-CEO for the new company; he will oversee the operations and integration of the two platforms and optimize the merger synergies, which are projected to save the combined company approximately $80 million per year.

The Feb. 1 8-K indicates that Rakowich will continue to earn a $1 million base salary through 2011. After that – on Jan. 1, 2012 – a new agreement kicks in; while Rakowich’s base salary stays the same, the contract sets his target bonus at $1.5 million and his target incentive award at $4.8 million.

If Rakowich’s employment is terminated prior to January 1, 2012, the company may have to pay him a lump sum of $7.3 million no later than March 15, 2012, plus other payments and benefits, depending on the circumstances. If his employment ends during 2012 for reasons other than for cause, or if he terminates for good reason or upon expiration of the term, he gets his salary through Dec. 31, 2012, plus an extra $6 million, his target bonus, and medical benefits through Dec. 31, 2014.

Rakowich plans to retire at the end of 2012, the documents show, leaving Moghadam as the sole CEO thereafter.

We’ll keep an eye out for the merger proxy. It will be interesting to see whether other directors and officers end up getting blue chip deals, as well.

Image source: willsfca via flickr


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