As filed with the Securities and Exchange Commission on April 12, 2011

Registration No. 333-172741

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

Amendment No. 1

to

Form S-4

 

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

AMB Property Corporation

(Exact name of registrant as specified in its charter)

 

 

Pier 1, Bay 1
San Francisco, CA 94111
(415) 394-9000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Tamra D. Browne, Esq.
Pier 1, Bay 1
San Francisco, CA 94111
(415) 394-9000
(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

 

 

Approximate date of commencement of the proposed sale of the securities to the public:  As soon as practicable after this Registration Statement becomes effective and upon completion of the mergers described in the enclosed document.

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

(Do not check if a smaller reporting company)

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such dates as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

PRELIMINARY — SUBJECT TO COMPLETION — DATED APRIL 12, 2011

 

 

MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT

 

The board of directors of AMB Property Corporation and the board of trustees of ProLogis have each approved an agreement to combine the two companies through a merger of equals. The proposed transaction will create a truly global owner, operator and developer of industrial real estate. The combined company, which will be named “ProLogis, Inc.” and will be organized as an umbrella partnership real estate investment trust, or “UPREIT,” is expected to have a pro forma equity market capitalization of approximately $14 billion, a total market capitalization in excess of $24 billion, and gross assets owned and managed of approximately $46 billion. We believe that the combined company will create a stronger, more liquid enterprise poised to take advantage of changing market conditions to become the leading global provider of industrial real estate.

 

In the proposed transactions, ProLogis shareholders will receive 0.4464 of a newly issued share of AMB common stock for each ProLogis common share that they own. This exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing. AMB common stock and ProLogis common shares are each traded on the New York Stock Exchange, under the ticker symbols “AMB” and “PLD,” respectively. Based on the closing price of AMB common stock on the New York Stock Exchange (which we refer to as the “NYSE”) of $32.86 on January 26, 2011, the last trading day before ProLogis common share and AMB common stock prices may have been affected by market speculation regarding a potential transaction involving the companies, the exchange ratio represented approximately $14.67 in AMB common stock for each ProLogis common share. Based on the closing price of AMB common stock on the NYSE of $32.93 on January 28, 2011, the last trading day before public announcement of the proposed transactions, the exchange ratio represented approximately $14.70 in AMB common stock for each ProLogis common share. Based on the closing price of AMB common stock on the NYSE of $35.06 on April 8, 2011, the latest practicable date before the date of this joint proxy statement/prospectus, the exchange ratio represented approximately $15.65 in AMB common stock for each ProLogis common share. The value of the merger consideration will fluctuate with changes in the market price of AMB common stock. We urge you to obtain current market quotations of AMB common stock and ProLogis common shares.

 

The merger of AMB and ProLogis will be accomplished through a first-step merger of ProLogis and an indirect wholly owned subsidiary of ProLogis and a second-step merger of a parent entity of that subsidiary with AMB. ProLogis will continue its existence as a subsidiary of the combined company. If the merger of AMB and ProLogis is completed, each share of each series of ProLogis preferred shares will be converted into a share of AMB preferred stock of corresponding series having rights, privileges, powers and preferences substantially identical to those of the relevant series of ProLogis preferred shares. Holders of ProLogis preferred shares and AMB preferred stock are not entitled to, and are not being requested to, vote at the special meetings.

 

Based upon the number of outstanding shares on the record date for each special meeting, we anticipate that AMB will issue [ • ] shares of common stock and [ • ] shares of preferred stock in connection with the mergers described herein, and will reserve approximately [ • ] shares of common stock for issuance in respect of ProLogis equity awards, convertible notes and other arrangements that AMB will assume in connection with the merger. Upon completion of the transactions, we estimate that former AMB stockholders will own approximately 40% of the common stock of the combined company and former ProLogis shareholders will own approximately 60% of the common stock of the combined company.

 

Each of the mergers is intended to qualify as a reorganization for U.S. federal income tax purposes, and, accordingly, assuming the transaction so qualifies, ProLogis shareholders generally will not recognize any gain or loss for U.S. federal income tax purposes on the surrender of their ProLogis common shares and receipt of AMB common stock, except with respect to cash received in lieu of any fractional shares of AMB common stock.

 

Your vote is very important, regardless of the number of shares you own.  The combination of AMB and ProLogis cannot be completed without the approval of both the AMB stockholders and the ProLogis shareholders, including the approval by AMB stockholders of certain amendments to the AMB bylaws. Each of AMB and ProLogis is holding a special meeting to vote on the proposals necessary to complete the merger transactions. We urge you to read this joint proxy statement/prospectus carefully. The obligations of AMB and ProLogis to complete the merger are subject to the satisfaction or waiver of several conditions set forth in the merger agreement. More information about AMB, ProLogis, the special meetings and the merger is included in this joint proxy statement/prospectus. You should also consider carefully the risks that are described in the “Risk Factors” section beginning on page 20.

 

Whether or not you plan to attend your company’s special meeting, please submit your proxy as soon as possible to make sure that your shares of AMB common stock or ProLogis common shares are represented at that meeting.

 

The AMB board of directors recommends that AMB stockholders vote “FOR” the proposal to approve the merger with ProLogis, including the issuance of AMB common stock and preferred stock to ProLogis shareholders, the proposed amendments to the AMB bylaws, which approvals are necessary to complete the merger, and the proposed amendments to the AMB charter.

 

The ProLogis board of trustees recommends that ProLogis shareholders vote “FOR” the proposal to approve the merger agreement and the transactions contemplated thereby, which approval is necessary to complete the merger.

 

We join our respective boards in their recommendation, and look forward to the successful combination of AMB and ProLogis.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this joint proxy statement/prospectus or determined that this joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

 

This joint proxy statement/prospectus is dated [ • ], 2011 and is first being mailed to the stockholders of AMB and shareholders of ProLogis on or about [ • ], 2011.

AMB Property Corporation
Pier 1, Bay 1
San Francisco, CA 94111
(415) 394-9000

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On [ • ], 2011

 

Dear Stockholders of AMB Property Corporation:

We are pleased to invite you to attend a special meeting of stockholders of AMB Property Corporation, a Maryland corporation. The meeting will be held at [ • ], on [ • ], 2011, at [ • ], local time, to consider and vote upon the following matters:

The approval by AMB stockholders of both the proposal to approve the merger and the proposal to amend certain provisions of the bylaws is required for the completion of the merger. However, approval of the proposal to amend the AMB charter is not a condition to completion of the merger.

Please refer to the attached joint proxy statement/prospectus for further information with respect to the business to be transacted at the AMB special meeting.

Holders of record of shares of AMB common stock at the close of business on [ • ], 2011 are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the special meeting.

The proposal to approve the merger, including the issuance of AMB common and preferred stock to ProLogis shareholders in connection therewith, requires the affirmative vote of holders of two-thirds of the outstanding AMB common stock. The proposal to approve the bylaw amendment requires the affirmative vote of the holders of a majority of the outstanding AMB common stock. The proposal to approve the amendment to the AMB charter requires the affirmative vote of holders of two-thirds of the outstanding AMB common stock. A proposal to adjourn the AMB special meeting would require the affirmative vote of holders of a majority of the AMB common stock, represented in person or by proxy, at the AMB special meeting and entitled to vote on the proposal.

Your vote is important. Whether or not you expect to attend the AMB special meeting in person, we urge you to vote your shares as promptly as possible by (1) accessing the Internet website specified on your proxy card; (2) calling the toll-free number specified on your proxy card; or (3) signing and returning the enclosed proxy card in the postage-paid envelope provided, so that your shares may be represented and voted at the AMB special meeting. If your shares are held in the name of a bank, broker or other fiduciary, please follow the instructions on the voting instruction card furnished by the record holder.

 

By Order of the Board of Directors,

 

TAMRA D. BROWNE, ESQ.

Senior Vice President, General Counsel and Secretary

 

[ • ], 2011

San Francisco, California

 

 

ProLogis
4545 Airport Way
Denver, CO 80239
(303) 567-5761

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To Be Held On [ • ], 2011

 

Dear Shareholders of ProLogis:

 

We are pleased to invite you to attend a special meeting of shareholders of ProLogis, a Maryland real estate investment trust. The meeting will be held at [ • ], on [ • ], 2011, at [ • ], local time, to consider and vote upon the following matters:

 

 

Please refer to the attached joint proxy statement/prospectus for further information with respect to the business to be transacted at the ProLogis special meeting.

 

Holders of record of ProLogis common shares at the close of business on [ • ], 2011 are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the special meeting.

 

The proposal to approve the Merger requires the affirmative vote of holders of a majority of the outstanding ProLogis common shares. A proposal to adjourn the ProLogis special meeting would require the affirmative vote of a majority of the votes cast on the matter by the holders of the ProLogis common shares represented, in person or by proxy, at the ProLogis special meeting.

 

Your vote is important. Whether or not you expect to attend the ProLogis special meeting in person, we urge you to vote your shares as promptly as possible by (1) accessing the Internet website specified on your proxy card; (2) calling the toll-free number specified on your proxy card; or (3) signing and returning the enclosed proxy card in the postage-paid envelope provided, so that your shares may be represented and voted at the ProLogis special meeting. If your shares are held in the name of a bank, broker or other fiduciary, please follow the instructions on the voting instruction card furnished by the record holder.

 

For the Board of Trustees,

 

Edward S. Nekritz

Secretary

 

[ • ], 2011

Denver, Colorado

 

ADDITIONAL INFORMATION

 

This joint proxy statement/prospectus incorporates by reference important business and financial information about AMB and ProLogis from other documents that are not included in or delivered with this joint proxy statement/prospectus. This information is available to you without charge upon your request. You can obtain the documents incorporated by reference into this joint proxy statement/prospectus by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:

 

 

Investors may also consult the websites of AMB or ProLogis for more information concerning the Merger described in this joint proxy statement/prospectus. The website of AMB is www.AMB.com and the website of ProLogis is www.ProLogis.com. Information included on these websites is not incorporated by reference into this joint proxy statement/prospectus.

 

If you would like to request any documents, please do so by [•], 2011 in order to receive them before the meetings.

 

For more information, see “Where You Can Find More Information.”

 

ABOUT THIS DOCUMENT

 

This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the Securities and Exchange Commission by AMB Property Corporation (File No. 333-172741), constitutes a prospectus of AMB under Section 5 of the U.S. Securities Act of 1933, as amended (which we refer to as the “Securities Act”), with respect to the AMB common stock and AMB preferred stock to be issued to ProLogis shareholders in connection with the Merger. This document also constitutes a joint proxy statement of AMB and ProLogis under Section 14(a) of the U.S. Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”). It also constitutes a notice of meeting with respect to the special meeting of AMB stockholders and a notice of meeting with respect to the special meeting of ProLogis shareholders, at which AMB stockholders and ProLogis shareholders, respectively, will be asked to vote upon certain proposals to approve the Merger and certain related matters.

 

You should rely only on the information contained or incorporated by reference into this joint proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated [•], 2011. You should not assume that the information contained in, or incorporated by reference into, this joint proxy statement/prospectus is accurate as of any date other than the date on the front cover of those documents. Neither our mailing of this joint proxy statement/prospectus to AMB stockholders or ProLogis shareholders nor the issuance of AMB common stock or preferred stock in connection with the Merger will create any implication to the contrary.

 

 

 

 

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this joint proxy statement/prospectus regarding AMB has been provided by AMB and information contained in this joint proxy statement/prospectus regarding ProLogis has been provided by ProLogis.

 

TABLE OF CONTENTS

 

 

The following are answers to some questions that you, as a stockholder of AMB Property Corporation (which we refer to as “AMB”) or a shareholder of ProLogis, may have regarding the proposed transactions between AMB and ProLogis and the other matters being considered at the stockholder meeting of AMB and at the shareholder meeting of ProLogis. AMB and ProLogis urge you to read carefully the remainder of this joint proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the Merger and the other matters being considered at the special meetings. Additional important information is also contained in the annexes to and the documents incorporated by reference into this joint proxy statement/prospectus.

 

 

 

 

 

 

 

 

 

 

 

SUMMARY

 

Information about the Companies

 

Risk Factors (See page 19)

 

The Merger

	•	first, in the ProLogis merger, ProLogis will be reorganized into an UPREIT by merging Pumpkin LLC with and into ProLogis, with ProLogis continuing as the surviving entity and as a wholly owned subsidiary of Upper Pumpkin and an indirect wholly owned subsidiary of New Pumpkin;
	•	following the ProLogis merger, in the Topco merger, New Pumpkin will be merged with and into AMB, with AMB continuing as the surviving corporation under the name of “ProLogis, Inc.”; and
	•	following the Topco merger, the combined company will contribute all of the outstanding equity interests of Upper Pumpkin to AMB LP, which will be renamed “ProLogis, L.P.”, in exchange for the issuance of partnership units to the combined company.

										ProLogis Common
										Shares (Adjusted by
		AMB Common Stock				ProLogis Common				Exchange Ratio)
		(Close)				Shares (Close)				(Close)
January 26, 2011		$	32.86			$	14.70			$	14.67
January 28, 2011		$	32.93			$	15.21			$	14.70
April 8, 2011		$	35.06			$	15.71			$	15.65

	•	each outstanding Series C Cumulative Redeemable Preferred Share of Beneficial Interest of ProLogis (which we refer to as “ProLogis Series C preferred shares”) will be exchanged for one newly issued share of Cumulative Redeemable Preferred Stock, Series Q, of AMB (which we refer to as “AMB Series Q preferred stock”);

	•	each outstanding Series F Cumulative Redeemable Preferred Share of Beneficial Interest of ProLogis (which we refer to as “ProLogis Series F preferred shares”) will be exchanged for one newly issued share of Cumulative Redeemable Preferred Stock, Series R, of AMB (which we refer to as “AMB Series R preferred stock”); and
	•	each outstanding Series G Cumulative Redeemable Preferred Share of Beneficial Interest of ProLogis (which we refer to as “ProLogis Series G preferred shares”) will be exchanged for one newly issued share of Cumulative Redeemable Preferred Stock, Series S, of AMB (which we refer to as “AMB Series S preferred stock”).

	•	receipt of the requisite approvals of AMB stockholders and ProLogis shareholders;
	•	the approval for listing of shares of AMB common stock, AMB Series R preferred stock and AMB Series S preferred stock to be issued or reserved for issuance in connection with the Merger on the NYSE;
	•	the SEC having declared effective the registration statement of which this joint proxy statement/prospectus forms a part;
	•	the absence of any judgment or other legal prohibition or binding order of any court or other governmental entity prohibiting the Merger;
	•	the receipt of regulatory approvals required in connection with the Merger;
	•	the correctness of all representations and warranties made by the parties in the merger agreement and performance by the parties of their obligations under the merger agreement (subject in each case to certain materiality standards);
	•	the receipt of a legal opinion from tax counsel of ProLogis regarding the qualification of the ProLogis merger as a reorganization for U.S. federal income tax purposes; and
	•	the receipt of legal opinions from the respective tax counsels of AMB and ProLogis regarding the qualification of the Topco merger as a reorganization for U.S. federal income tax purposes and the qualification of each of the parties as a REIT.

	•	by mutual written consent of AMB and ProLogis;
	•	by either AMB or ProLogis, if the Merger is not consummated by September 30, 2011;
	•	by either AMB or ProLogis, if a court or other governmental entity issues a final and nonappealable order prohibiting the Merger;
	•	by either AMB or ProLogis, if the required approvals of either the AMB stockholders or the ProLogis shareholders are not obtained;
	•	by either AMB or ProLogis, if there is a breach of the representations or covenants of the other party that would result in the failure of the related closing condition to be satisfied, and such breach is not cured or is not curable by September 30, 2011;
	•	by either AMB or ProLogis, if the board of the other party changes its recommendation in favor of the Topco merger, in the case of the board of AMB, or the ProLogis merger or Topco merger in the case of the board of ProLogis;
	•	by either AMB or ProLogis, if the special meeting of the other party is not called and held as required by the merger agreement; or
	•	by either AMB or ProLogis, upon a material breach of the other party’s non-solicitation obligations under the merger agreement.

 

The AMB Special Meeting (See page 109)

	•	a proposal to approve the Topco merger (including the issuance of AMB common stock and preferred stock to ProLogis shareholders in connection with the Topco merger);
	•	a proposal to approve the bylaw amendment;
	•	a proposal to approve the charter amendment; and
	•	a proposal to adjourn the AMB special meeting, if necessary or appropriate, to solicit additional proxies in favor of the foregoing proposals.

 

The ProLogis Special Meeting (See page 116)

	•	a proposal to approve the Merger; and
	•	a proposal to adjourn the ProLogis special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the Merger.

 

Rights of ProLogis Shareholders Will Change as a Result of the Merger (See page 130)

 

SELECTED HISTORICAL FINANCIAL DATA OF AMB

		Year Ended December 31,
		2010				2009				2008				2007				2006
		(In millions, except per share amounts)
Operating Data:
Total revenues		$	634			$	618			$	678			$	636			$	679
Income (loss) from continuing operations		$	9			$	(124	)		$	(18	)		$	282			$	210
Income from discontinued operations		$	24			$	96			$	11			$	90			$	78
Net income (loss) before cumulative effect of change in accounting principle		$	34			$	(28	)		$	(7	)		$	372			$	289
Net income (loss)		$	34			$	(28	)		$	(7	)		$	372			$	289
Net income (loss) available to common stockholders		$	10			$	(50	)		$	(66	)		$	294			$	208
(Loss) income from continuing operations available to common stockholders per common share:
Basic		$	(0.08	)		$	(1.01	)		$	(0.77	)		$	2.17			$	1.54
Diluted		$	(0.08	)		$	(1.01	)		$	(0.77	)		$	2.12			$	1.49
Income from discontinued operations available to common stockholders per common share:
Basic		$	0.14			$	0.64			$	0.09			$	0.85			$	0.83
Diluted		$	0.14			$	0.64			$	0.09			$	0.83			$	0.80
Net income (loss) available to common stockholders per common share
Basic		$	0.06			$	(0.37	)		$	(0.68	)		$	3.02			$	2.37
Diluted		$	0.06			$	(0.37	)		$	(0.68	)		$	2.95			$	2.29
Cash dividends per common shares		$	1.12			$	1.12			$	1.56			$	2.00			$	1.84
Weighted average common shares outstanding
Basic			162				134				97				97				88
Diluted			162				134				97				100				91

		December 31,
		2010				2009				2008				2007				2006
		(In millions)
Balance Sheet Data:
Investments in real estate (at cost)		$	6,906			$	6,709			$	6,604			$	6,710			$	6,576
Total assets		$	7,373			$	6,842			$	7,302			$	7,262			$	6,714
Total debt		$	3,331			$	3,213			$	3,990			$	3,495			$	3,437
Total liabilities and non-controlling interests		$	4,052			$	3,902			$	4,787			$	4,498			$	4,547
Preferred stock		$	223			$	223			$	223			$	223			$	223
Total stockholders’ equity (excluding preferred stock)		$	3,097			$	2,717			$	2,292			$	2,541			$	1,943

		For the Years Ended December 31,
		2010				2009				2008				2007				2006
		(In millions)
Funds from operations (FFO), as adjusted(1):
Net income (loss) available to common stockholders		$	10			$	(50	)		$	(66	)		$	294			$	208
Gains from sale or contribution of real estate interests, net			(20	)			(39	)			(23	)			(86	)			(45	)
Total depreciation and amortization			190				174				162				158				176
Adjustments to derive FFO, as defined by NAREIT from consolidated joint ventures			(22	)			(17	)			(19	)			(22	)			(35	)
Adjustments to derive FFO, as defined by NAREIT from unconsolidated joint ventures			43				32				26				20				(7	)
Funds from operations, as defined by NAREIT(1)		$	201			$	100			$	80			$	364			$	297
Adjustments for impairment charges, restructuring charges, preferred unit redemption (discount) premium and debt extinguishment:
Real estate impairment losses(2)			1				182				194				1				6
Pursuit costs and tax reserve			—				—				12				—				—
Restructuring charges			5				6				12				—				—
Loss on early extinguishment of debt			3				12				1				—				—
Preferred unit redemption (discount) premium			—				(10	)			—				3				1
Allocation to participating securities			—				(1	)			(1	)			—				(1	)
FFO, as adjusted(1)		$	210			$	289			$	298			$	368			$	303
AMB’s share of development profits, net of taxes			(7	)			(88	)			(77	)			(168	)			(106	)
Allocation to participating securities			—				—				1				1				1
Core funds from operations (Core FFO), as adjusted(1)		$	203			$	201			$	222			$	201			$	198
Cash flows provided by (used in):
Operating activities		$	253			$	243			$	303			$	241			$	336
Investing activities		$	(587	)		$	84			$	(882	)		$	(632	)		$	(881	)
Financing activities		$	330			$	(298	)		$	580			$	420			$	484

(1)		AMB believes that net income, as defined by GAAP, is the most appropriate earnings measure. However, AMB considers funds from operations, as adjusted (“FFO, as adjusted”), funds from operations, as defined by NAREIT (“FFO, as defined by NAREIT”) and core funds from operations, as adjusted (“Core FFO, as adjusted”, which together with FFO, as adjusted and FFO, as defined by NAREIT, we refer to as the “FFO Measures, as adjusted”) to be useful supplemental measures of its operating performance. AMB calculates FFO, as adjusted, as net income (or loss) available to common stockholders, calculated in accordance with GAAP, less gains (or losses) from dispositions of real estate held for investment purposes and real estate-related depreciation, and adjustments to derive AMB’s pro rata share of FFO, as adjusted, of consolidated and unconsolidated joint ventures. AMB calculates Core FFO, as adjusted, as FFO, as adjusted excluding the share of development profits of AMB. These calculations also include adjustments for items as described below.

		Unless stated otherwise, AMB includes the gains from development, including those from value-added conversion projects, before depreciation recapture, as a component of FFO, as adjusted. AMB believes gains from development should be included in FFO, as adjusted, to more completely reflect the performance of one of our lines of business. AMB believes that value-added conversion dispositions are in substance land sales and as such should be included in FFO, as adjusted, consistent with the real estate investment trust industry’s long standing practice to include gains on the sale of land in funds from operations. However, AMB’s interpretation of FFO, as adjusted, may not be consistent with the views of others in the real estate investment trust industry, who may consider it to be a divergence from the National Association of Real Estate Investment Trusts (“NAREIT”) definition, and may not be comparable to funds from operations or funds from operations per share reported by other real estate investment trusts

		that interpret the current NAREIT definition differently than AMB does. In connection with the formation of a joint venture, AMB may warehouse assets that are acquired with the intent to contribute these assets to the newly formed venture. Some of the properties held for contribution may, under certain circumstances, be required to be depreciated under GAAP. If this circumstance arises, AMB intends to include in its calculation of FFO, as adjusted, gains or losses related to the contribution of previously depreciated real estate to joint ventures. Although such a change, if instituted, will be a departure from the current NAREIT definition, AMB believes such calculation of FFO, as adjusted, will better reflect the value created as a result of the contributions. To date, AMB has not included gains or losses from the contribution of previously depreciated warehoused assets in FFO, as adjusted.

		In addition, AMB calculates FFO, as adjusted, to exclude impairment and restructuring charges, debt extinguishment losses and preferred unit redemption discounts/premiums. The impairment charges were principally a result of increases in estimated capitalization rates and deterioration in market conditions that adversely impacted values. The restructuring charges reflected costs associated with the reduction in global headcount and cost structure of AMB. Debt extinguishment losses generally included the costs of repurchasing debt securities. AMB repurchased certain tranches of senior unsecured debt to manage its debt maturities in response to the current financing environment, resulting in greater debt extinguishment costs. The preferred unit redemption discounts/premiums reflect the gain/loss associated with the liquidation preference in the preferred unit redemption price less costs incurred as a result of the redemption. In 2008, AMB also recognized charges to write-off pursuit costs related to development projects it no longer planned to commence and to establish a reserve against tax assets associated with the reduction of its development activities. Although difficult to predict, these items may be recurring given the uncertainty of the current economic climate and its adverse effects on the real estate and financial markets. While not infrequent or unusual in nature, these items result from market fluctuations that can have inconsistent effects on the results of operations of AMB. The economics underlying these items reflect market and financing conditions in the short-term but can obscure the performance of AMB and the value of the long-term investment decisions and strategies of AMB. AMB management believes FFO, as adjusted, is significant and useful to both it and its investors. FFO, as adjusted, more appropriately reflects the value and strength of the business model of AMB and its potential performance isolated from the volatility of the current economic environment and unobscured by costs (or gains) resulting from the management of AMB of its financing profile in response to the tightening of the capital markets. However, in addition to the limitations of the FFO Measures, as adjusted, generally discussed below, FFO, as adjusted, does not present a comprehensive measure of the financial condition and operating performance of AMB. This measure is a modification of the NAREIT definition of funds from operations and should not be used as an alternative to net income or cash flow from operations as defined by GAAP.

		AMB believes that the FFO Measures, as adjusted, are meaningful supplemental measures of its operating performance because historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time, as reflected through depreciation and amortization expenses. However, since real estate values have historically risen or fallen with market and other conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient. Thus, the FFO Measures, as adjusted, are supplemental measures of operating performance for real estate investment trusts that exclude historical cost depreciation and amortization, among other items, from net income available to common stockholders, as defined by GAAP. AMB believes that the use of the FFO Measures, as adjusted, combined with the required GAAP presentations, has been beneficial in improving the understanding of operating results of real estate investment trusts among the investing public and making comparisons of operating results among such companies more meaningful. AMB considers the FFO Measures, as adjusted, to be useful measures for reviewing comparative operating and financial performance because, by excluding gains or losses related to sales of previously depreciated operating real estate assets and real estate depreciation and amortization, the FFO Measures, as adjusted, can help the investing public compare the operating performance of a company’s real estate between periods or as compared to other companies. While funds from operations is a relevant and widely used measure of operating performance of real estate investment trusts, the FFO Measures, as adjusted, do not represent cash flow from operations or net income as defined by GAAP and should not be considered as alternatives to those measures in evaluating the liquidity or operating performance of AMB. The FFO Measures, as adjusted, also do not consider the costs associated with capital expenditures related to the real estate assets of AMB nor are the FFO Measures, as adjusted, necessarily indicative of cash available to fund the future cash requirements of AMB. AMB management compensates for the limitations of the FFO Measures, as adjusted, by providing investors with financial statements prepared according to GAAP, along with this detailed discussion of the FFO Measures, as adjusted, and a reconciliation of the FFO Measures, as adjusted, to net income available to common stockholders, a GAAP measurement.

(2)		Includes adjustments for AMB’s share of real estate impairment losses from unconsolidated and consolidated joint ventures.

 

SELECTED HISTORICAL FINANCIAL DATA OF PROLOGIS

		Years Ended December 31,
		2010				2009				2008				2007				2006
		(In millions, except per share amounts)
Operating Data:
Total revenues(1)		$	909			$	1,055			$	5,396			$	5,944			$	2,209
Total expenses(1)		$	1,503			$	1,089			$	4,897			$	4,922			$	1,556
Operating income (loss)(1)(2)		$	(594	)		$	(35	)		$	500			$	1,022			$	654
Interest expense		$	461			$	373			$	385			$	389			$	294
Earnings (loss) from continuing operations(2)		$	(1,582	)		$	(346	)		$	(359	)		$	853			$	609
Discontinued operations		$	311			$	370			$	(91	)		$	205			$	269
Consolidated net earnings (loss)(2)		$	(1,270	)		$	24			$	(450	)		$	1,058			$	878
Net earnings (loss) attributable to common shares(2)		$	(1,296	)		$	(3	)		$	(479	)		$	1,028			$	849
Net earnings (loss) per share attributable to common shares — Basic:
Continuing operations		$	(3.27	)		$	(0.93	)		$	(1.48	)		$	3.20			$	2.36
Discontinued operations			0.63				0.92				(0.34	)			0.80				1.09
Net earnings (loss) per share attributable to common shares - Basic(2)		$	(2.64	)		$	(0.01	)		$	(1.82	)		$	4.00			$	3.45
Net earnings (loss) per share attributable to common shares - Diluted:
Continuing operations		$	(3.27	)		$	(0.93	)		$	(1.48	)		$	3.09			$	2.27
Discontinued operations			0.63				0.92				(0.34	)			0.77				1.05
Net earnings (loss) per share attributable to common shares — Diluted(2)		$	(2.64	)		$	(0.01	)		$	(1.82	)		$	3.86			$	3.32
Weighted average common shares outstanding:
Basic			492				403				263				257				246
Diluted			492				403				263				267				257
Common Share Distributions:
Common share cash distributions paid		$	281			$	272			$	543			$	473			$	393
Common share distributions paid per share		$	0.56			$	0.70			$	2.07			$	1.84			$	1.60
FFO(3):
Reconciliation of net earnings (loss) to FFO:
Net earnings (loss) attributable to common shares(2)		$	(1,296	)		$	(3	)		$	(479	)		$	1,028			$	849
Total NAREIT defined adjustments			241				213				449				150				149
FFO, as defined by NAREIT			1,055				210				(30	)			1,178				998
Our defined adjustments:
Foreign currency exchange losses (gains), net			11				(58	)			144				16				(19	)
Current income tax expense			—				4				10				3				23
Deferred income tax expense (benefit)			(52	)			(23	)			4				1				(54	)
Our share of reconciling items from unconsolidated investees:
Foreign currency exchange losses (gains), net			(9	)			(2	)			2				2				—
Unrealized losses (gains) on derivative contracts, net			4				(8	)			23				—				—
Deferred income tax expense (benefit)			—				16				(19	)			6				(3	)

		Years Ended December 31,
		2010				2009				2008				2007				2006
		(In millions, except per share amounts)
FFO attributable to common shares as defined by ProLogis, including significant non-cash items			(1,101	)			139				134				1,206				945
Add (deduct) significant non-cash items:
Impairment of real estate properties(2)			824				331				275				—				—
Impairment of goodwill and other assets(2)			413				164				321				—				—
Impairment (net gain) related to China operations			—				(3	)			198				—				—
Loss (gain) on early extinguishment of debt			31				(172	)			(91	)			—				—
Write-off deferred financing fees associated with credit facility restructuring			8				—				—				—				—
Our share of certain losses recognized by the property funds, net			11				9				108				—				—
FFO attributable to common shares as defined by ProLogis, excluding significant non-cash items		$	186			$	468			$	945			$	1,206			$	945
Cash Flow Data:
Net cash provided by operating activities(1)		$	241			$	89			$	888			$	1,230			$	664
Net cash provided by (used in) investing activities		$	733			$	1,235			$	(1,347	)		$	(4,076	)		$	(2,047	)
Net cash provided by (used in) financing activities		$	(970	)		$	(1,463	)		$	358			$	2,742			$	1,645

		As of December 31,
		2010				2009				2008(1)				2007(1)				2006
		(in millions)
Financial Position:
Real estate properties owned, excluding land held for development, before depreciation		$	11,346			$	12,606			$	13,234			$	14,414			$	12,482
Land held for development or targeted for disposition(2)		$	1,534			$	2,574			$	2,483			$	2,153			$	1,397
Net investments in properties		$	11,284			$	13,508			$	14,134			$	15,199			$	12,615
Investments in and advances to unconsolidated investees		$	2,025			$	2,107			$	2,195			$	2,252			$	1,300
Total assets		$	14,903			$	16,797			$	19,210			$	19,652			$	15,827
Total debt		$	6,506			$	7,978			$	10,711			$	10,217			$	8,387
Total liabilities		$	7,382			$	8,790			$	12,452			$	11,848			$	9,376
Non-controlling interests		$	15			$	20			$	20			$	79			$	52
ProLogis shareholders’ equity		$	7,505			$	7,987			$	6,738			$	7,725			$	6,399
Number of common shares outstanding			570				474				267				258				251

(1)		During 2010 and 2009, ProLogis contributed certain properties with any resulting gain or loss reflected as net gains in the Consolidated Statements of Operations of ProLogis and as cash provided by investing activities. In 2008 and previous years, ProLogis reflected these contributions as gross revenues and expenses as cash provided by operating activities. See the Consolidated Financial Statements of ProLogis contained in Item 8 of ProLogis’ Form 10-K for the year ended December 31, 2010 for more information.
(2)		During 2010, ProLogis recognized impairment charges of $824.3 million on certain of its real estate properties, which includes $87.7 million in Discontinued Operations and $412.7 million related to goodwill and other assets. During 2009, ProLogis recognized impairment charges of $331.6 million on certain of its real estate properties and $163.6 million related to goodwill and other assets. During 2008, ProLogis recognized impairment charges of $274.7 million on certain of its real estate properties and $320.6 million related to goodwill and other assets. In addition, during 2008, ProLogis recognized impairment charges of $198.2 million in Discontinued Operations related to the net assets of ProLogis’ China operations that were reclassified as held for sale and its share of impairment charges recorded by an unconsolidated investee of $108.2 million. See ProLogis’ Consolidated Financial Statements contained in Item 8 of ProLogis’ Form 10-K for the year ended December 31, 2010 in for more information.
(3)		Funds from operations (“FFO”) is a non-GAAP measure that is commonly used in the real estate industry. The most directly comparable GAAP measure to FFO is net earnings. Although the NAREIT has published a definition of FFO, modifications to the NAREIT calculation of FFO are common among REITs, as companies seek to provide financial measures that meaningfully reflect their business. FFO, as ProLogis defines it, is presented as a supplemental financial measure. FFO is not used by ProLogis as, nor should it be considered to be, an alternative to net earnings computed under GAAP as an indicator of the operating performance of ProLogis or as an alternative to cash from operating activities computed under GAAP as an indicator of the ability of ProLogis to fund its cash needs.
		FFO is not meant to represent a comprehensive system of financial reporting and does not present, nor does ProLogis intend it to present, a complete picture of its financial condition and operating performance. ProLogis believes net earnings

		computed under GAAP remains the primary measure of performance and that FFO is only meaningful when it is used in conjunction with net earnings computed under GAAP. Further, ProLogis believes that its consolidated financial statements, prepared in accordance with GAAP, provide the most meaningful picture of its financial condition and operating performance.
		At the same time that NAREIT created and defined its FFO concept for the REIT industry, it also recognized that “management of each of its member companies has the responsibility and authority to publish financial information that it regards as useful to the financial community.” ProLogis believes that financial analysts, potential investors and shareholders who review the operating results of ProLogis are best served by a defined FFO measure that includes other adjustments to net earnings computed under GAAP in addition to those included in the NAREIT defined measure of FFO. The FFO measures of ProLogis are discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Funds From Operations” in its Annual Report on Form 10-K for its fiscal year ended December 31, 2010 which is incorporated into this joint proxy statement/prospectus by reference. See “Where You Can Find More Information.”

 

SUMMARY UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

		December 31, 2010
		(In millions, except
		per share amounts)
Operating Data:
Total revenues		$	1,536
Operating loss		$	(495	)
Loss from continuing operations		$	(1,575	)
Loss from continuing operations attributable to common shares		$	(1,621	)
Loss from continuing operations per share attributable to common shares:
Basic		$	(3.89	)
Diluted		$	(3.89	)
Balance Sheet Data:
Net investments in real estate		$	23,742
Total assets		$	25,174
Total debt		$	9,906
ProLogis, Inc. shareholders’ equity		$	13,224

 

EQUIVALENT AND COMPARATIVE PER SHARE INFORMATION

		ProLogis								AMB
						Pro Forma								Pro Forma
		Historical				Combined				Historical				Equivalent
Loss from continuing operations available to common share, per common share:
Basic		$	(3.27	)		$	(3.89	)		$	(0.08	)		$	(1.56	)
Diluted		$	(3.27	)		$	(3.89	)		$	(0.08	)		$	(1.56	)
Dividends declared per common share		$	0.56			$	0.56			$	1.12			$	0.22
Book value per common share		$	12.55			$	29.85			$	18.36			$	11.94

		December 31,
		2010				2009				2008				2007				2006
		(Dollars in millions)
Consolidated ratio of earnings to combined fixed charges and preferred stock dividends(1):			—				—				—				1.9				1.5

(1)		The consolidated ratio of earnings to combined fixed charges and preferred stock dividends was less than one-to-one for the years ended December 31, 2010, 2009 and 2008. For the years ended December 31, 2010, 2009 and 2008, earnings were insufficient to cover combined fixed charges and preferred stock dividends by $40.8 million, $183.1 million and $100.4 million, respectively.

 

In addition to the other information included and incorporated by reference into this joint proxy statement/prospectus, including the matters addressed in “Cautionary Statement Regarding Forward-Looking Statements,” you should carefully consider the following risks before deciding how to vote. In addition, you should read and consider the risks associated with each of the businesses of AMB and ProLogis because these risks will also affect the combined company. These risks can be found in the respective Annual Reports on Form 10-K for the year ended December 31, 2010 of AMB and ProLogis, each of which is filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. You should also read and consider the other information in this joint proxy statement/prospectus and the other documents incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information.”

 

The exchange ratio is fixed and will not be adjusted in the event of any change in the stock prices of either AMB or ProLogis.

 

Upon the closing of the Merger, each ProLogis common share will be converted into the right to receive 0.4464 of a newly issued share of AMB common stock, with cash paid in lieu of fractional shares. The exchange ratio was fixed in the merger agreement, and while it will be adjusted in the event of a recapitalization, merger, subdivision, issuer tender or exchange offer or other similar transaction involving AMB or ProLogis, the exchange ratio will not be adjusted for changes in the market price of either AMB common stock or ProLogis common shares. Changes in the price of AMB common stock prior to the Merger will affect the market value of the merger consideration that ProLogis shareholders will receive on the closing date of the Merger. Stock price changes may result from a variety of factors (many of which are beyond our control), including the following factors:

 

 

The price of AMB common stock at the closing of the Merger may vary from its price on the date the merger agreement was executed, on the date of this joint proxy statement/prospectus and on the date of the special meetings of AMB and ProLogis. As a result, the market value of the merger consideration represented by the exchange ratio will also vary. For example, based on the range of trading prices of AMB common stock during the period after January 26, 2011, the last trading day before ProLogis common share and AMB common stock prices may have been affected by market speculation regarding a potential transaction involving the companies, through April 8, 2011, the latest practicable date before the date of this joint proxy statement/prospectus, the exchange ratio of 0.4464 represented a market value ranging from a low of $14.60 to a high of $16.29.

 

Because the Merger will be completed after the date of the special meetings, at the time of your special meeting, you will not know the exact market value of the AMB common stock that ProLogis shareholders will receive upon completion of the Merger. You should consider the following two risks:

 

 

 

Therefore, while the number of shares of AMB common stock to be issued per ProLogis common share is fixed, ProLogis shareholders cannot be sure of the market value of the consideration they will receive upon completion of the Merger.

 

Failure to complete the Merger could negatively affect the stock prices and the future business and financial results of AMB and ProLogis.

 

If the Merger is not completed, the ongoing businesses of AMB or ProLogis may be adversely affected and AMB and ProLogis will be subject to numerous risks, including the following:

 

 

If the Merger is not completed, AMB and ProLogis cannot assure their shareholders that these risks will not materialize and will not materially affect the business, financial results and stock prices of AMB or ProLogis.

 

The merger agreement contains provisions that could discourage a potential acquirer of either AMB or ProLogis or could result in any acquisition proposal being at a lower price than it might otherwise be.

 

The merger agreement contains provisions that, subject to limited exceptions, restrict the ability of each of AMB and ProLogis to solicit, encourage, facilitate or discuss third-party proposals to acquire all or a significant part of AMB or ProLogis. Further, even if the AMB board of directors or ProLogis board of trustees withdraws or modifies its recommendation of the Topco merger or the Merger, respectively, they will still be required to submit the matter to a vote of their respective stockholders or shareholders at the special meetings. In addition, either AMB or ProLogis generally has an opportunity to offer to modify the terms of the proposed merger agreement in response to any acquisition proposal that may be made to the other party before the board of directors or board of trustees, as the case may be, may withdraw or modify its recommendation in response to such acquisition proposal. In some circumstances, on termination of the merger agreement, one of the parties may be required to pay a substantial termination fee to the other party. See “The Merger — Termination of the Merger Agreement.”

 

These provisions could discourage a potential acquirer that might have an interest in acquiring all or a significant part of AMB or ProLogis from considering or proposing such an acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than that market value proposed to be received or realized in the Merger, or might result in a potential acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances under the merger agreement.

 

The pendency of the Merger could adversely affect the business and operations of AMB and ProLogis.

 

In connection with the pending Merger, some customers or vendors of each of AMB and ProLogis may delay or defer decisions, which could negatively affect the revenues, earnings, cash flows and expenses of AMB and ProLogis, regardless of whether the Merger is completed. Similarly, current and prospective employees of AMB

and ProLogis may experience uncertainty about their future roles with the combined company following the Merger, which may materially adversely affect the ability of each of AMB and ProLogis to attract and retain key personnel during the pendency of the Merger. In addition, due to operating covenants in the merger agreement, each of AMB and ProLogis may be unable, during the pendency of the Merger, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial.

 

Some of the directors and executive officers of AMB and trustees and executive officers of ProLogis have interests in seeing the Merger completed that are different from, or in addition to, those of the other AMB stockholders and ProLogis shareholders.

 

Some of the directors and executive officers of AMB and trustees and executive officers of ProLogis have arrangements that provide them with interests in the Merger that are different from, or in addition to, those of the stockholders of AMB or the shareholders of ProLogis. These interests include, among other things, the continued service as a director or an executive officer of the combined company and, in the case of AMB directors and executive officers, the opportunity to participate in the new non-qualified deferred compensation plan (which we refer to as the “new NQDC plan”) which is conditioned on the consummation of the Topco merger. These interests, among other things, may influence or may have influenced the directors and executive officers of AMB and trustees and executive officers of ProLogis to support or approve the Topco merger or Merger, respectively.

 

Operational Risks

 

The combined company expects to incur substantial expenses related to the Merger.

 

The combined company expects to incur substantial expenses in connection with completing the Merger and integrating the business, operations, networks, systems, technologies, policies and procedures of the two companies. There are a large number of systems that must be integrated, including billing, management information, purchasing, accounting and finance, sales, payroll and benefits, fixed asset, lease administration and regulatory compliance. Although AMB and ProLogis have assumed that a certain level of transaction and integration expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of their integration expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Due to these factors, the transaction and integration expenses associated with the Merger could, particularly in the near term, exceed the savings that the combined company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the integration of the businesses following the completion of the Merger. As a result of these expenses, both AMB and ProLogis expect to take charges against their earnings before and after the completion of the Merger. The charges taken in connection with the Merger are expected to be significant, although the aggregate amount and timing of such charges are uncertain at present.

 

Following the Merger, the combined company may be unable to integrate the businesses of AMB and ProLogis successfully and realize the anticipated synergies and related benefits of the Merger or do so within the anticipated timeframe.

 

The Merger involves the combination of two companies that currently operate as independent public companies. AMB and ProLogis expect that the transaction will generate $80 million of annual gross savings in general and administrative expenses, based on preliminary estimates of certain personnel and non-personnel reductions. The personnel cost reductions are estimated to be approximately $65 million and relate to anticipated reductions of certain positions at both AMB and ProLogis that are believed to be redundant for the combined company. The non-personnel cost reductions are estimated to be approximately $15 million and relate to duplicative corporate infrastructure and public company operating expenses. AMB and ProLogis expect to realize these savings on an annualized run-rate basis by December 31, 2012.

 

However, the combined company will be required to devote significant management attention and resources to integrating the business practices and operations of AMB and ProLogis. Potential difficulties the combined company may encounter in the integration process include the following:

 

 

For all these reasons, you should be aware that it is possible that the integration process could result in the distraction of the combined company’s management, the disruption of the combined company’s ongoing business or inconsistencies in the combined company’s products, services, standards, controls, procedures and policies, any of which could adversely affect the ability of the combined company to maintain relationships with customers, vendors and employees or to achieve the anticipated benefits of the Merger, or could otherwise adversely affect the business and financial results of the combined company.

 

Following the Merger, the combined company may be unable to retain key employees.

 

The success of the combined company after the Merger will depend in part upon its ability to retain key AMB and ProLogis employees. Key employees may depart either before or after the Merger because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company following the Merger. Accordingly, no assurance can be given that AMB, ProLogis or, following the Merger, the combined company will be able to retain key employees to the same extent as in the past.

 

The Merger will result in changes to the board of directors and management of the combined company that may affect the strategy of the combined company as compared to that of AMB and ProLogis.

 

If the parties complete the Merger, the composition of the board of directors of the combined company and management team will change from the boards and management teams of AMB and ProLogis. The board of directors of the combined company will consist of 11 members, with five directors selected by the current board of directors of AMB and six directors selected by the current board of trustees of ProLogis. The combined company will also have executive officers from both AMB and ProLogis. This new composition of the board of directors and the management team of the combined company may affect the business strategy and operating decisions of the combined company upon the completion of the Merger.

 

The future results of the combined company will suffer if the combined company does not effectively manage its expanded operations following the Merger.

 

Following the Merger, the combined company may continue to expand its operations through additional acquisitions and other strategic transactions, some of which involve complex challenges. The future success of the combined company will depend, in part, upon the ability of the combined company to manage its expansion opportunities, which pose substantial challenges for the combined company to integrate new operations into its

existing business in an efficient and timely manner, and upon its ability to successfully monitor its operations, costs, regulatory compliance and service quality, and to maintain other necessary internal controls. The combined company cannot assure you that its expansion or acquisition opportunities will be successful, or that the combined company will realize its expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits.

 

The trading price of shares of the common stock of the combined company may be affected by factors different from those affecting the price of shares of AMB common stock or ProLogis common shares before the Merger.

 

If the Merger is completed, ProLogis shareholders will become holders of approximately 60%, and AMB stockholders will hold approximately 40%, of the outstanding shares of common stock of the combined company. The results of operations of the combined company, as well as the trading price of the common stock of the combined company, after the Merger may be affected by factors different from those currently affecting AMB’s or ProLogis’ results of operations and the trading prices of AMB common stock and ProLogis common shares. These factors include:

 

 

Accordingly, the historical trading prices and financial results of AMB and ProLogis may not be indicative of these matters for the combined company after the Merger. For a discussion of the business of AMB and ProLogis and of certain factors to consider in connection with that business, see the documents incorporated by reference by AMB or ProLogis into this joint proxy statement/prospectus referred to under “Where You Can Find More Information.”

 

Regulatory and Legal Risks

 

Counterparties to certain significant agreements with AMB or ProLogis may exercise contractual rights under such agreements in connection with the Merger.

 

AMB and ProLogis are each party to certain agreements that give the counterparty certain rights following a “change in control,” including in some cases the right to terminate the agreement. Under some such agreements, the Merger will constitute a change in control and therefore the counterparty may exercise certain rights under the agreement upon the closing of the Merger. Certain AMB and ProLogis funds, joint ventures, management and servicing contracts, leases and debt obligations have agreements subject to such provisions. Any such counterparty may request modifications of their respective agreements as a condition to granting a waiver or consent under their agreement. There is no assurance that such counterparties will not exercise their rights under the agreements, including termination rights where available, that the exercise of any such rights will not result in a material adverse effect or that any modifications of such agreements will not result in a material adverse effect.

 

In connection with the announcement of the merger agreement, several lawsuits have been filed and are pending, seeking, among other things, to enjoin the Merger and rescind the merger agreement, and an adverse judgment in any of the lawsuits may prevent the Merger from being effective or from becoming effective within the expected timeframe.

 

ProLogis, the members of the ProLogis board of trustees, the ProLogis chief executive officer, New Pumpkin, Upper Pumpkin, Pumpkin LLC, AMB and AMP LP, have each been named as defendants in several lawsuits brought by holders of ProLogis common shares challenging the Merger, and seeking, among other things, to enjoin the Merger, direct the defendants to exercise their fiduciary duties, rescind the merger agreement, and award the plaintiffs damages and expenses. If the plaintiffs are successful in obtaining an injunction prohibiting the parties from completing the Merger on the agreed upon terms, the injunction may prevent the completion of the Merger in the expected timeframe (if at all). For more information about litigation related to the Merger, see “The Merger — Litigation Relating to the Merger.”

REIT Risks

 

The combined company would succeed to, and may incur, adverse tax consequences if AMB or ProLogis has failed or fails to qualify as a REIT for U.S. federal income tax purposes.

 

If either AMB or ProLogis has failed or fails to qualify as a REIT for U.S. federal income tax purposes and the Merger is completed, the combined company generally would succeed to and may incur significant tax liabilities, and the combined company could possibly lose its REIT status should disqualifying activities continue after the Merger.

 

REITs are subject to a range of complex organizational and operational requirements.

 

As REITs, each of AMB and ProLogis must distribute with respect to each year at least 90% of its REIT taxable income to its stockholders or shareholders, as applicable. Other restrictions apply to a REIT’s income and assets. For any taxable year that AMB or ProLogis fails to qualify as a REIT, it will not be allowed a deduction for dividends paid to its stockholders or shareholders, as applicable, in computing taxable income and thus would become subject to U.S. federal and state income tax as if it were a regular taxable corporation. In such an event, AMB or ProLogis, as the case may be, could be subject to potentially significant tax liabilities. Unless entitled to relief under certain statutory provisions, AMB or ProLogis, as the case may be, would also be disqualified from treatment as a REIT for the four taxable years following the year in which it lost its qualification. If AMB or ProLogis failed to qualify as a REIT, the market price of the common stock of the combined company may decline and the combined company may need to reduce substantially the amount of distributions to its stockholders because of its increased tax liability.

 

Other Risks

 

In connection with the Merger, the combined company is planning to refinance a significant amount of indebtedness, and cannot guarantee that it will be able to obtain the necessary funds on favorable terms or at all.

 

The closing of the Merger may trigger termination of each of AMB’s and ProLogis’ respective credit agreements and the mandatory prepayment of the amounts outstanding thereunder, and the mandatory prepayment of certain secured mortgage debt of AMB, ProLogis or their affiliates. AMB and ProLogis are engaged in discussions with certain potential financing providers regarding one or more bank credit facilities to be entered into by the combined company at the time of the closing of the Merger, funds from which would be used in part to make such mandatory prepayments and to provide a source of liquidity for the combined company. However, the combined company’s ability to obtain such financing will depend on, among other factors, prevailing market conditions at the time of the closing of the Merger and other factors beyond the control of the combined company. AMB and ProLogis cannot assure you that the combined company will be able to obtain additional financing on terms acceptable to the combined company or at all. Completion of the Merger is not conditioned on completing such financing transactions.

 

If the combined company is unable to obtain such financing, or is unable to do so on terms acceptable to the combined company, the combined company or, prior to the closing of the Merger, AMB and ProLogis, may seek to obtain waivers or amendments of the mandatory prepayment provisions under the terms of AMB and ProLogis’ respective bank credit facilities. ProLogis sought and obtained a waiver of the termination and mandatory prepayment provisions of its bank credit facility with respect to the effect of the signing of the merger agreement, but such waiver does not extend to the termination and prepayment provisions which would be triggered by the closing of the Merger. In addition, AMB and ProLogis have sought certain consents related to mandatory prepayments of secured mortgage debt of the parties which may be triggered by the closing of the Merger. As of the date hereof, substantially all of the consents related to such mortgage debt requested by AMB have been received. ProLogis has delivered its requests for consents and waivers required under such mortgage debt, which has an aggregate principal amount of approximately $407 million (and could require the payment of associated prepayment penalties of approximately $45 million), and is awaiting responses to such requests. AMB and ProLogis cannot assure you that any further consents or waivers will be obtained if sought, or that the combined company will have sufficient funds available to make such mandatory prepayments if necessary.

The combined company will have a substantial amount of indebtedness and may need to incur more in the future.

 

The combined company will have substantial indebtedness. For example, as of December 31, 2010, the combined company would have had an estimated fixed charge coverage ratio of 2.5x and an estimated debt as a percentage of total market capitalization of 41.3% (by comparison, as of that date, the standalone figures for AMB were 2.6x and 37.2%, respectively, and for ProLogis were 2.3x and 42.9%, respectively). In addition, in connection with executing the combined company’s business strategies following the Merger, the combined company expects to continue to evaluate the possibility of acquiring additional properties and making strategic investments, and the combined company may elect to finance these endeavors by incurring additional indebtedness. Its substantial indebtedness could have material adverse consequences for the combined company, including (i) reducing the combined company’s credit ratings and thereby raising its borrowing costs, (ii) hindering the combined company’s ability to adjust to changing market, industry or economic conditions, (iii) limiting the combined company’s ability to access the capital markets to refinance maturing debt or to fund acquisitions or emerging businesses, (iv) limiting the amount of free cash flow available for future operations, acquisitions, dividends, stock repurchases or other uses, (v) making the combined company more vulnerable to economic or industry downturns, including interest rate increases and (vi) placing the combined company at a competitive disadvantage compared to less leveraged competitors.

 

Moreover, to respond to competitive challenges, the combined company may be required to raise substantial additional capital to execute its business strategy. The combined company’s ability to arrange additional financing will depend on, among other factors, the combined company’s financial position and performance, as well as prevailing market conditions and other factors beyond the combined company’s control. If the combined company is able to obtain additional financing, the combined company’s credit ratings could be further adversely affected, which could further raise the combined company’s borrowing costs and further limit its future access to capital and its ability to satisfy its obligations under its indebtedness.

 

The historical and unaudited pro forma combined condensed financial information included elsewhere in this joint proxy statement/prospectus may not be representative of the combined company’s results after the Merger, and accordingly, you have limited financial information on which to evaluate the combined company.

 

The unaudited pro forma combined condensed financial information included elsewhere in this joint proxy statement/prospectus has been presented for informational purposes only and is not necessarily indicative of the financial position or results of operations that actually would have occurred had the Merger been completed as of the date indicated, nor is it indicative of the future operating results or financial position of the combined company. The unaudited pro forma combined condensed financial information reflects adjustments, which are based upon preliminary estimates, to allocate the purchase price to AMB’s assets and liabilities. The purchase price allocation reflected in the unaudited pro forma combined condensed financial information included elsewhere in this joint proxy statement/prospectus is preliminary, and the final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of AMB as of the date of the completion of the Merger. The unaudited pro forma combined condensed financial information does not reflect future events that may occur after the Merger, including the costs related to the planned integration of the two companies and any future nonrecurring charges resulting from the Merger, and does not consider potential impacts of current market conditions on revenues or expense efficiencies. The unaudited pro forma combined condensed financial information presented elsewhere in this joint proxy statement/prospectus is based in part on certain assumptions regarding the Merger that AMB and ProLogis believe are reasonable under the circumstances. AMB and ProLogis cannot assure you that the assumptions will prove to be accurate over time.

 

AMB and ProLogis face other risks.

 

The risks listed above are not exhaustive, and you should be aware that, following the Merger, the combined company will face various other risks, including those discussed in reports filed by AMB and ProLogis with the SEC. See “Where You Can Find More Information.”

 

This joint proxy statement/prospectus and the documents incorporated by reference into this joint proxy statement/prospectus contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements, which are based on current expectations, estimates and projections about the industry and markets in which AMB and ProLogis operate and beliefs of and assumptions made by AMB management and ProLogis management , involve uncertainties that could significantly affect the financial results of AMB or ProLogis or the combined company. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature. Such forward-looking statements include, but are not limited to, statements about the benefits of the business combination transaction involving AMB and ProLogis, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to rent and occupancy growth, development activity and changes in sales or contribution volume of developed properties, general conditions in the geographic areas where we operate and the availability of capital in existing or new property funds — are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained and therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some of the factors that may affect outcomes and results include, but are not limited to, those set forth under “Risk Factors” as well as the following:

 

 

Neither AMB nor ProLogis undertakes any duty to update any forward-looking statements appearing in this document, except as may be required by applicable securities laws.

 

Pier 1, Bay 1

San Francisco, California 94111

(415) 394-9000

 

AMB, together with its subsidiaries, is a global owner, operator and developer of industrial real estate, focused on major hub and gateway distribution markets in the Americas, Europe and Asia. As of December 31, 2010, AMB owned, or had investments in, on a consolidated basis or through unconsolidated joint ventures, properties and development projects expected to total approximately 159.6 million square feet (14.8 million square meters) in 49 markets within 15 countries.

 

The business of AMB is operated primarily through its operating partnership, AMB LP. As of December 31, 2010, AMB owned an approximate 98.2% general partnership interest in the operating partnership, excluding preferred units. As the sole general partner of AMB LP, AMB has the full, exclusive and complete responsibility for and discretion in its day-to-day management and control. AMB LP holds substantially all of the assets of AMB and directly or indirectly holds the ownership interests in AMB’s joint ventures.

 

AMB, a Maryland corporation, is a self-administered and self-managed REIT, and it expects that it has qualified, and will continue to qualify, as a REIT for U.S. federal income tax purposes beginning with the year ended December 31, 1997. As a self-administered and self-managed REIT, the employees of AMB perform its corporate, administrative and management functions, rather than the company relying on an outside manager for these services. AMB believes that real estate is fundamentally a local business and is best operated by local teams in each of its markets. As a vertically integrated company, AMB actively manages its portfolio of properties. In select markets, AMB may, from time to time, establish relationships with third-party real estate management firms, brokers and developers that provide some property-level administrative and management services under the company’s direction.

 

AMB was incorporated in the state of Maryland in 1997, and AMB LP was formed in the state of Delaware in 1997. AMB common stock is listed on the NYSE, trading under the symbol “AMB.” The primary office of AMB is located in San Francisco, California.

 

Additional information about AMB and its subsidiaries is included in documents incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information.”

 

4545 Airport Way

Denver, Colorado 80239

(303) 567-5000

 

ProLogis is a leading global provider of industrial distribution facilities. ProLogis is organized as a Maryland real estate investment trust and has elected to be taxed as a REIT under the Code. The world headquarters of ProLogis are located in Denver, Colorado. The European headquarters of ProLogis are located in the Grand Duchy of Luxembourg with its European customer service headquarters located in Amsterdam, the Netherlands. The primary office of ProLogis in Asia is located in Tokyo, Japan.

 

ProLogis was formed in 1991, primarily as a long-term owner of industrial distribution space operating in the United States. Over time, the business strategy of ProLogis evolved to include the development of properties for contribution to property funds in which ProLogis maintains an ownership interest and the management of those property funds and the properties they own. Originally, ProLogis sought to differentiate itself from its competition by focusing on the distribution space requirements of its corporate customers on a national, regional and local basis and providing customers with consistent levels of service throughout the United States. However, as the needs of its customers expanded to markets outside the United States, so did the portfolio and management team of ProLogis.

Today, ProLogis is an international real estate company with operations in North America, Europe and Asia. The business strategy of ProLogis is to integrate international scope and expertise with a strong local presence in its markets, thereby becoming an attractive choice for its targeted customer base, the largest global users of distribution space, while achieving long-term sustainable growth in cash flow.

 

ProLogis common stock is listed on the NYSE, trading under the symbol “PLD.”

 

New Pumpkin Inc., a Maryland corporation, Upper Pumpkin LLC, a Delaware limited liability company, and Pumpkin LLC, a Delaware limited liability company, are direct and indirect, wholly owned subsidiaries of ProLogis and were formed in January 2011 for the purpose of effecting the Merger.

 

Additional information about ProLogis and its subsidiaries is included in documents incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information.”

 

     Pier 1, Bay 1

     San Francisco, California 94111

     (415) 394-9000

 

     4545 Airport Way

     Denver, Colorado 80239

     (303) 567-5000

 

The combined company will be named “ProLogis, Inc.” and will be a Maryland corporation that is a self-administered and self-managed REIT for U.S. federal income tax purposes. The combined company is expected to be a leading global owner, operator and developer of industrial real estate. The combined company is expected to have a pro forma equity market capitalization of approximately $14 billion, a total market capitalization in excess of $24 billion, and gross assets owned and managed of approximately $46 billion. The combined company will own or manage approximately 600 million square feet (approximately 55 million square meters) of modern distribution facilities located in key gateway markets and logistics corridors in 22 countries.

 

References to the “combined company” in this document shall be to AMB Property Corporation after the effective time of the Merger, which will be renamed as “ProLogis, Inc.”

 

The business of the combined company will be operated through an operating partnership, ProLogis, L.P. On a pro forma basis giving effect to the Merger, the combined company will own an approximate 99.3% general partnership interest in the operating partnership, excluding preferred units, and, as its sole general partner, the combined company will have the full, exclusive and complete responsibility for and discretion in the day-to-day management and control of the operating partnership.

 

The common stock of the combined company will be listed on the NYSE, trading under the symbol “PLD.”

 

The following is a discussion of the Merger and the material terms of the merger agreement between AMB and ProLogis. You are urged to read the merger agreement carefully and in its entirety, a copy of which is attached as Annex A to this joint proxy statement/prospectus and incorporated by reference herein.

 

The boards and management teams of AMB and ProLogis have periodically and in the ordinary course evaluated and considered a variety of financial and strategic opportunities as a part of their respective long-term strategies to maximize shareholder value. In 2001 and 2005, members of the management teams of AMB and ProLogis engaged in preliminary discussions regarding a potential strategic business combination between the two companies, but these prior discussions never resulted in any agreement regarding a potential combination and the discussions were terminated.

 

Throughout 2009 and early 2010, AMB management discussed with the AMB board of directors a variety of potential strategic growth opportunities that they believed might be available at attractive prices, in part due to the continuing effects of the financial crisis and resulting market disruptions. In addition, AMB management discussed with the AMB board of directors a possible merger with ProLogis. During 2010, ProLogis management had several strategic discussions with the ProLogis board of trustees regarding the future growth in its fund management business and international expansion, including the possible reentry into China and expansion into Brazil. In addition, ProLogis management discussed with the ProLogis board of trustees the need to continue to strengthen ProLogis’ balance sheet in the months and years ahead.

 

In May 2010, a large private equity firm, which we refer to as “Company A,” approached ProLogis management regarding a potential transaction involving ProLogis. The parties engaged in various discussions involving the net asset value and future growth potential of ProLogis and ProLogis management kept the board of trustees apprised of the status of such discussions. Despite such discussions, the parties did not discuss any specific terms of a possible transaction nor did Company A make any proposal regarding a possible transaction involving ProLogis.

 

In September 2010, Company A again approached ProLogis management and expressed interest in a transaction involving a potential acquisition of ProLogis. Management informed the ProLogis board of trustees as to such expression of interest and, in light of previous discussions with Company A, ProLogis management stated that if Company A put forth a specific proposal regarding an acquisition or other transaction, ProLogis could evaluate whether to enter into a confidentiality agreement and provide further information on ProLogis to Company A. In mid-October 2010, after numerous follow-up conversations between members of management of ProLogis and Company A, Company A informed ProLogis that it did not believe that it could provide an acquisition proposal that it would expect to be acceptable to ProLogis based upon, among other things, the increase in the trading price of ProLogis common shares, ProLogis’ significant land holdings and limitations on Company A’s ability to place substantial additional debt on ProLogis as a result of covenants under ProLogis’ indenture.

 

In September 2010, Mr. Eugene F. Reilly, President, The Americas for AMB, and Mr. Ted R. Antenucci, President and Chief Investment Officer of ProLogis, had discussions regarding how Mr. Hamid R. Moghadam, Chairman and Chief Executive Officer of AMB, could approach Mr. Walter C. Rakowich, Chief Executive Officer of ProLogis, to initiate a discussion regarding a possible merger.

 

Following a meeting of the AMB board of directors in September 2010, Mr. Moghadam initiated an informal discussion with Mr. William E. Sullivan, Chief Financial Officer of ProLogis, at an event organized by Morgan Stanley to discuss whether ProLogis management would be receptive to engage in discussions regarding a possible business combination between AMB and ProLogis. Mr. Sullivan informed Mr. Moghadam that ProLogis was currently occupied with pursuing certain transactions which he could not discuss, and that ProLogis management may have greater availability to engage in such discussions following the completion of such transactions. At that time, ProLogis was nearing an announcement of a sale of a portfolio of industrial assets and in substantive discussions with a potential buyer of a portfolio of non-core retail and mixed-use assets.

 

In early November 2010, Mr. Moghadam called Mr. Rakowich to determine whether they could meet to discuss a potential business combination between the two companies. Mr. Rakowich agreed to meet with Mr. Moghadam and, prior to the meeting, informed the ProLogis board of trustees of such meeting. Messrs. Moghadam and Rakowich met on November 6, 2010 following a conference hosted by J.P. Morgan in Napa Valley, California that they both attended. During this meeting, Messrs. Moghadam and Rakowich had informal discussions about their respective companies, their preliminary views of the rationale for a strategic business combination of AMB and ProLogis, and governance and operational issues that would need to be addressed in connection with such a combination, including issues relating to selecting the management team of the combined company, related succession planning issues, the name of the combined company, and the location of the headquarters of the combined company.

 

On November 10, 2010, Mr. Rakowich convened a telephonic meeting of the board of trustees of ProLogis at which he informed the board of trustees of his discussions with Mr. Moghadam. The ProLogis board discussed some of the issues that would need to be addressed in a possible business combination and determined that it should engage Morgan Stanley to act as its financial advisor and to prepare financial analyses for its upcoming board meeting in December.

 

During the remainder of November 2010, Messrs. Moghadam and Rakowich had further informal discussions by phone regarding a potential strategic business combination of the two companies. During these discussions, Messrs. Moghadam and Rakowich acknowledged that governance and operational issues, including the selection of the management team of the combined company and the determination of where the headquarters of the combined company would be located, would need to be resolved in a manner satisfactory to both parties in order to enable continuity of management and an effective and timely integration of the two companies’ operations and to otherwise achieve the financial and strategic benefits of a business combination. During this period Mr. Moghadam updated Jeffrey L. Skelton, the lead outside director of AMB, on the status of his discussions with ProLogis, and Mr. Skelton in turn updated other members of the AMB board of directors.

 

On November 29, 2010, the ProLogis board of trustees held a telephonic meeting at which Mr. Rakowich summarized the status of the current discussions with AMB. Representatives of Mayer Brown LLP and Greenberg Traurig, LLP, legal counsel to ProLogis, also participated in this meeting and discussed with the ProLogis board their duties as trustees in considering a potential business combination transaction.

 

On December 6 and 7, 2010, the ProLogis board held a regularly scheduled board meeting at which Mr. Rakowich again discussed the potential combination of ProLogis and AMB. A representative of Morgan Stanley attended part of this meeting and provided a preliminary financial overview of such a potential business combination. The ProLogis board of trustees discussed the financial and strategic benefits of a potential transaction, as well as several issues that would need to be addressed to the satisfaction of the board, including governance of the combined company, operational structuring, achievement of synergies and integration. The ProLogis board authorized Mr. Rakowich to continue preliminary discussions regarding a potential business combination with a view toward whether the issues discussed at the meeting could be resolved and requested that Mr. Rakowich continue to keep the ProLogis board of trustees apprised of any such discussions.

 

On December 9, 2010, Mr. Moghadam updated the AMB board of directors about his discussions with Mr. Rakowich. The AMB board of directors expressed its support of senior management in continuing to engage in preliminary discussions with members of ProLogis management regarding such potential strategic combination. Later that day, Mr. Rakowich called Mr. Moghadam to continue their discussion of a potential business combination.

 

On December 10, 2010, Mr. Moghadam met Mr. Irving F. Lyons, a member of the ProLogis board of trustees, for a previously scheduled breakfast in San Francisco. During the breakfast and afterward during a visit to AMB’s offices, Messrs. Moghadam and Lyons discussed the strategic business rationale for the proposed combination of AMB and ProLogis.

 

On December 11 and 12, 2010, Messrs. Rakowich and Lyons and Messrs. Moghadam and Lyons had a series of conversations regarding potential alternatives to address the issues of a combined company’s governance and operational structure, including the composition of the initial management team, management succession planning, the composition of the board of directors, the location of the headquarters of the combined company and the name of

the combined company. On December 13, 2010, Mr. Rakowich had a further conversation with Mr. Moghadam focusing on these issues.

 

On December 15, 2010, the ProLogis board of trustees met telephonically and Messrs. Rakowich and Lyons reported on their recent discussions with Mr. Moghadam. Mr. Rakowich recommended to the ProLogis board that he and Mr. Lyons have an in-person meeting with Mr. Moghadam to determine whether and on what terms the governance and operational issues could be resolved. The ProLogis board of trustees expressed its support for these discussions.

 

On December 16, 2010, Messrs. Rakowich and Lyons met with Mr. Moghadam in San Francisco to continue to discuss the terms of a potential business combination, including the governance arrangements and the operational structure of the combined company.

 

From December 17 to December 20, 2010, Messrs. Rakowich and Moghadam continued to engage in communications regarding terms for a potential business combination. A preliminary understanding was reached in the course of these communications that any transaction would be a “merger of equals,” that the exchange ratio would be determined on an “at-the-market” basis (i.e., based on the relative market prices of shares of AMB and ProLogis, although Messrs. Rakowich and Moghadam did not discuss any specific figures for the exchange ratio at that time), that the board of the combined company would consist of a majority of persons nominated by ProLogis, that Messrs. Moghadam and Rakowich would share the position of chief executive officer of the combined company with Mr. Rakowich stepping down from such role at some future date, that the corporate headquarters would be located in San Francisco and the operational headquarters would be located in Denver and that the combined company would operate under the ProLogis name. Messrs. Moghadam and Rakowich acknowledged that any preliminary understanding between them would be subject to the approval of the boards of AMB and ProLogis following further due diligence and an exploration of the remaining terms of a strategic business combination transaction.

 

On December 22, 2010, the AMB board of directors had a telephonic meeting with members of senior management, representatives of J.P. Morgan, who had been invited the previous day to participate in the meeting as AMB’s financial advisor in connection with a potential transaction, and representatives of Wachtell, Lipton, Rosen & Katz, AMB’s legal advisor in connection with a potential transaction. Mr. Moghadam reported to the AMB board of directors on the progress of discussions with ProLogis about a potential strategic business combination, including his preliminary understanding with Mr. Rakowich on the form of transaction, governance arrangements and name of the combined company. The AMB board of directors then discussed with Mr. Moghadam and AMB’s advisors open issues with respect to the transaction. J.P. Morgan and Wachtell Lipton discussed with the AMB board that the potential business combination was proposed to be structured as a “merger of equals” and engaged in discussion with the AMB board on the features of a “merger of equals” transaction. Following discussion by the AMB board with senior management and AMB’s advisors, the AMB board expressed its support for management and AMB’s advisors to continue to explore a strategic business combination transaction, and, in the event further progress was made in the negotiations, engaging with ProLogis in a mutual due diligence review process.

 

On December 22, 2010, the ProLogis board of trustees had a telephonic meeting with members of the senior management of ProLogis and representatives of Greenberg Traurig, LLP and Mayer Brown LLP. Mr. Rakowich summarized the discussions with Mr. Moghadam regarding a potential business combination of ProLogis and AMB and explained the business rationale for such a transaction. Mr. Rakowich described the proposed structure of the transaction as a “merger of equals” and described the other aspects of the proposed transaction. The ProLogis board of trustees discussed with Mr. Rakowich the business rationale for such a transaction and the potential impact of such a transaction on ProLogis. Mr. Rakowich further discussed with the ProLogis board of trustees open issues with respect to the transaction. Following such discussion, the ProLogis board of trustees confirmed its support for management to continue discussions with AMB regarding a “merger of equals” and, if further progress was made in such discussions, to provide an updated financial analysis of such a transaction for the board’s consideration. In the event that the discussions with AMB did not result in the pursuit of a merger with AMB, the ProLogis board of trustees did not intend for ProLogis to pursue other business combinations and was prepared to have ProLogis continue as a stand-alone company.

 

From December 28, 2010 through December 31, 2010, Messrs. Moghadam and Rakowich had a series of conversations to discuss the management structure of the combined company. During this period, representatives of the two companies discussed potential timing for negotiating and signing a merger agreement, and continued negotiations over governance arrangements, transaction structure and the business plan of a combined company, and engaged in due diligence reviews of the other party’s publicly available information.

On December 31, 2010, AMB and ProLogis, with the assistance of their advisors, entered into a confidentiality agreement that included mutual standstill and confidentiality restrictions.

 

On January 5, 2011, Mr. Rakowich, together with Mr. Sullivan and Mr. Edward S. Nekritz, General Counsel of ProLogis, met with Mr. Moghadam, Mr. Thomas S. Olinger, Chief Financial Officer of AMB, Ms. Tamra D. Browne, General Counsel of AMB, and Ms. Nancy Hemmenway, Senior Vice President, Human Resources of AMB, in San Francisco to discuss the various business functions of the combined company that would be located in Denver and San Francisco, and to discuss the strategy and operations of the combined company, as well as the integration of the AMB and ProLogis businesses.

 

On January 6, 2011, the ProLogis board of trustees met in San Francisco with Messrs. Sullivan, Antenucci and Nekritz, representatives of Morgan Stanley and representatives of Mayer Brown LLP and Greenberg Traurig, LLP in connection with the potential transaction. Mr. Rakowich reviewed the background of the negotiations with AMB and provided an update of the negotiations since the December 22 meeting of the ProLogis board of trustees. Mr. Rakowich described the current proposal for governance and management structure and succession and the various functions of the combined company, with a corporate headquarters located in San Francisco and an operational headquarters located in Denver. Representatives of Morgan Stanley then provided an updated financial analysis to the ProLogis board of trustees of the proposed transaction, including potential cost savings and other financial and operational synergies that could result from such a transaction based on the financial projections and cost-savings estimates provided by the management of ProLogis and AMB. The ProLogis board of trustees discussed the combined company’s cost of capital and strategies for growth, and the impact of the potential business combination on customers of ProLogis as well as its employees. The board also discussed the terms and conditions under which Mr. Rakowich might continue his role as chief executive officer of ProLogis and, in the event that an agreement was reached with respect to a transaction, the combined company. After further discussion with the members of senior management of ProLogis and the financial and legal advisors of ProLogis, the ProLogis board of trustees authorized ProLogis management to continue discussions with AMB regarding a business combination transaction consistent with the terms described to the ProLogis board of trustees.

 

From January 6 to January 11, 2011, the two companies, with the assistance of their advisors, continued to negotiate governance arrangements (including the composition of the initial management team, management succession planning, the composition and committee structure of the board of directors, and the provisions of the combined company’s charter and bylaws), potential transaction structures, proposed transaction terms, and the business plan of a combined company.

 

On January 9, 2011, members of AMB management, including Messrs. Moghadam and Olinger, Mmes. Browne and Hemmenway, members of ProLogis management, including Messrs. Rakowich, Sullivan and Nekritz, and their respective legal and financial advisors met in Denver, Colorado to discuss the proposed structure of a potential business combination and to negotiate terms of the transaction. The participants in the discussions agreed that the business combination should be structured in a manner that achieves the greatest operational, tax and accounting efficiencies, regardless of which legal entities survived as a technical matter. In particular, both parties acknowledged the importance of the combined company operating under an UPREIT structure and structuring the transaction in an efficient manner to accomplish that goal. The discussions focused on a three-step transaction in which ProLogis would be reorganized into an UPREIT structure with a newly formed subsidiary of ProLogis as the new holding company and ProLogis as an indirect subsidiary of the new holding company, the subsequent merger of the new holding company into AMB, with AMB changing its name to “ProLogis Inc.”, and the subsequent contribution of ProLogis to AMB’s operating partnership.

 

On January 12, 2011, the AMB board of directors met with AMB senior management and AMB’s outside legal and financial advisors. Mr. Moghadam, J.P. Morgan and Wachtell Lipton updated the AMB board on the status of negotiations with ProLogis. J.P. Morgan then reviewed and discussed with the AMB board financial information regarding ProLogis, AMB and the transaction. Wachtell Lipton and members of management then reviewed and discussed with the AMB board the proposed terms of a business combination.

 

Over the course of the next week, AMB and ProLogis and their respective advisors continued to work to negotiate terms for a potential business combination, including the negotiation of transaction documentation. During this time, Messrs. Moghadam and Rakowich came to a preliminary understanding that Mr. Rakowich would

serve as co-chief executive officer and board member of the combined company until December 31, 2012. On January 15, 2011, each of ProLogis and AMB opened its electronic data room to the other party, and the parties and their advisors commenced due diligence review of the information made available.

 

On January 16, 2011, Mr. Moghadam, Ms. Hemmenway, Mr. Guy P. Jaquier, President Europe and Asia and President, Private Capital of AMB, and Mr. Reilly, met in Denver with Messrs. Rakowich and Nekritz, Mr. Gary E. Anderson, Head of Global Operations and Investment Management of ProLogis, and Mr. Michael S. Curless, Managing Director of Global Capital Deployment of ProLogis. The parties engaged in detailed discussions of various matters that would be important to the strategic success of the potential transaction, including the operational structure and roles of the proposed members of the management team of the combined company as well as other personnel of the combined company. Additional meetings were held by Messrs. Sullivan and Olinger in Denver on January 16, 2011 to engage in a detailed discussion and negotiation of the integration of many of the corporate functions.

 

On January 16, 2011, an initial draft of a merger agreement was distributed by Wachtell Lipton to ProLogis and its legal advisors. Over the course of the next two weeks, AMB and ProLogis and their respective legal and financial advisors continued to negotiate the merger agreement and other transaction documentation and to conduct their financial and legal due diligence reviews. The parties and their advisors also discussed both governmental and third-party approvals and consents that would be required in connection with a business combination, and continued their analysis of the integration of the two companies and the potential synergies from the combination.

 

On January 20, 2011, the AMB board of directors received an update from AMB senior management and AMB’s outside advisors about the progress of the discussions between AMB and ProLogis. Senior management and AMB’s outside advisors also discussed the potential benefits and risks of the proposed transaction at this meeting. Later that evening, at the invitation of the ProLogis board of trustees, Messrs. Moghadam, Jaquier, Olinger and Reilly and Ms. Hemmenway met the ProLogis board of trustees and Messrs. Nekritz and Antenucci for dinner in San Francisco to introduce themselves and to discuss some of the rationales for the business combination.

 

On January 21, 2011, the ProLogis board of trustees met with members of senior management of ProLogis and their financial and legal advisors. Representatives of Morgan Stanley provided a detailed review and update to the ProLogis board of trustees on the status of its financial due diligence services, including its review of potential G&A, financial and operational synergies. The representatives from Morgan Stanley also presented an analysis of exchange ratio considerations. Morgan Stanley then reviewed the financial structure and benefits of a combined company. Legal representatives from Greenberg Traurig, LLP and Mayer Brown LLP then provided the ProLogis board of trustees with a summary of the structure of the transaction and the proposed terms of the merger agreement. At the conclusion of the meeting, the ProLogis board of trustees expressed its support for continuing to pursue the potential business combination and requested that management continue its work as to the achievement of the potential G&A, financial and operational synergies from the proposed business combination. The board also considered the terms and conditions upon which members of ProLogis management and ProLogis employees would be offered continuing employment with the combined company and appropriate retention and severance arrangements. At the invitation of the ProLogis board of trustees, Mr. Moghadam also joined the meeting to present his views on the strategic priorities of the combined company.

 

During the afternoon of January 21, 2011 and during the course of the day on January 22, 2011, Messrs. Rakowich and Moghadam and other members of the senior management teams of ProLogis and AMB continued to meet in San Francisco to discuss in detail specific means for the achievement of cost and financial synergies from the proposed business combination as well as the integration of the two companies and specific roles of personnel of both companies.

 

On the evening of January 22, 2011, Messrs. Moghadam and Rakowich came to a preliminary understanding with respect to the exchange ratio that they would present to their respective boards. They had previously discussed proceeding on the basis of an “at-the-market” exchange ratio, and, after examining the market prices of AMB common stock and ProLogis common shares over various time periods and reviewing whether those prices were consistent with each company’s internal estimates of value, they agreed to present to their respective boards an exchange ratio of 0.4464.

On January 26, 2011, following published reports of a potential transaction between AMB and ProLogis by various media outlets, including the Wall Street Journal, members of AMB management, members of ProLogis management and its board of trustees and their respective legal and financial advisors held discussions as to how the parties would respond to the publications. AMB and ProLogis agreed that each company would publish a press release stating that AMB and ProLogis were engaged in discussions regarding a potential merger of equals, in which the two companies would combine in an all-stock, at-market transaction, based upon the unaffected trading prices of the two companies’ stock prior to media reports of a possible merger. Each press release further noted that it was not certain if or when a definitive agreement would be reached.

 

On January 28 and 29, 2011, members of AMB management, members of ProLogis management, and their respective legal and financial advisors met at the offices of Wachtell Lipton to finalize negotiation of the merger agreement and other transaction documentation, including employment arrangements.

 

On January 29, 2011, the directors and trustees, respectively, of AMB and ProLogis came to New York City for a joint board dinner at the offices of J.P. Morgan.

 

On January 30, 2011, the AMB board of directors met to consider the proposed strategic business combination of AMB and ProLogis. At this meeting, AMB management, Wachtell Lipton and J.P. Morgan provided an update to the AMB board on the negotiation of the proposed transaction and the results of the due diligence review of ProLogis, and reviewed the strategic rationale and the anticipated benefits of the proposed transaction to AMB stockholders. Representatives of J.P. Morgan then reviewed with the AMB board the financial terms of the proposed transaction and presented J.P. Morgan’s financial analysis of the proposed Topco merger. After further discussion with the AMB board, J.P. Morgan then delivered to the AMB board its oral opinion (as subsequently confirmed in writing in an opinion dated January 30, 2011), as described under “— Opinion of AMB’s Financial Advisor,” that, as of the date of that opinion and based upon and subject to the assumptions, procedures, factors, qualifications and limitations set forth in its opinion, the exchange ratio of 0.4464 provided for in the Topco merger was fair, from a financial point of view, to AMB. Representatives of Wachtell Lipton discussed with the AMB board the duties applicable to its decisions with respect to its review and consideration of the proposed transaction, and reviewed the material terms of the proposed merger agreement and the post-closing governance arrangements, as well as compensation and benefits issues in connection with the transaction. Following these presentations and discussions, and other discussions by the AMB board concerning, among other things, the matters described below under “— AMB’s Reasons for the Topco Merger; Recommendations of the AMB Board of Directors,” the AMB board of directors, by a unanimous vote of all directors, concluded that the proposed merger agreement and the transactions contemplated thereby, including the Topco merger, were advisable and in the best interests of AMB and its stockholders, and approved the merger agreement.

 

On January 30, 2011, the ProLogis board of trustees also met to consider the proposed strategic business combination of AMB and ProLogis. At this meeting, ProLogis’ senior management reviewed with the ProLogis board of trustees the business terms of the proposed transaction. ProLogis management, together with ProLogis’ legal and financial advisors, reviewed the results of the due diligence review of AMB, and reviewed the strategic rationale and the anticipated benefits of the proposed transaction to ProLogis shareholders. Representatives of Morgan Stanley then reviewed with the ProLogis board of trustees the financial terms of the proposed transaction and presented its financial analysis of the proposed transaction. After further discussion with the ProLogis board of trustees, Morgan Stanley then delivered to the ProLogis board of trustees its oral opinion (as subsequently confirmed in writing in an opinion dated January 30, 2011), as described under “— Opinion of ProLogis’ Financial Advisor,” that, as of the date of that opinion and based upon and subject to the assumptions, procedures, factors, qualifications and limitations set forth in its opinion, the exchange ratio of 0.4464 pursuant to the merger agreement was fair, from a financial point of view, to the holders of ProLogis common shares. Representatives of Mayer Brown LLP and Greenberg Traurig, LLP discussed with the ProLogis board of trustees the duties applicable to its decisions with respect to its review and consideration of the proposed transaction, and reviewed the material terms of the proposed merger agreement and the post-closing governance arrangements, as well as compensation and benefits issues in connection with the transaction. Following these presentations and discussions, and other discussion by the ProLogis board of trustees concerning, among other things, the matters described below under “— ProLogis’ Reasons for the Merger; Recommendations of the ProLogis Board of Trustees,” the ProLogis board of trustees, by a unanimous vote of all trustees, concluded that the proposed merger agreement and the transactions contemplated

thereby, including the ProLogis merger and the Topco merger, were advisable and in the best interests of ProLogis and its shareholders, and approved the merger agreement.

 

Following the approvals of the AMB board of directors and ProLogis board of trustees, AMB and ProLogis finalized and executed the merger agreement and other transaction documentation. On January 31, 2011, AMB and ProLogis issued a joint press release announcing the transaction.

 

After careful consideration, the AMB board of directors, by a unanimous vote of all directors, at a meeting held on January 30, 2011, determined that the merger agreement and the transactions contemplated thereby, including the Topco merger, are advisable and in the best interests of AMB and its stockholders, and approved the merger agreement. In reaching its decision, the AMB board of directors consulted with AMB’s senior management and its financial and legal advisors, and considered a number of factors that the board of directors believed supported its decision, including the following material factors:

 

 

 

 

 

 

 

 

The AMB board of directors also considered a variety of risks and other potentially negative factors concerning the merger agreement and the Merger, including the following:

 

 

 

 

 

 

 

In addition to considering the factors described above, the AMB board of directors considered the fact that some of AMB’s directors and executive officers have other interests in the Merger that are different from, or in addition to, the interests of AMB stockholders, as discussed under “ — Interests of AMB Directors and Executive Officers in the Merger.”

 

The AMB board of directors concluded that the potentially negative factors associated with the Merger were outweighed by the potential benefits that it expected the AMB stockholders would achieve as a result of the Merger.

Accordingly, the AMB board of directors determined that the merger agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of, AMB and its stockholders.

 

The above discussion of the factors considered by the AMB board of directors is not intended to be exhaustive, but does set forth the material factors considered by the AMB board of directors. In reaching its decision to approve the merger agreement and the transactions contemplated by the merger agreement, the AMB board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The AMB board of directors considered all these factors as a whole, including discussions with, and questioning of, AMB management and AMB’s financial and legal advisors, and overall considered the factors to be favorable to, and to support, its determination.

 

For the reasons set forth above, the AMB board of directors unanimously determined that the merger agreement and the transactions contemplated thereby, including the Topco merger, are advisable and in the best interests of AMB and its stockholders, and unanimously approved the merger agreement. The AMB board of directors unanimously recommends that the AMB stockholders vote “FOR” the Topco merger, including the issuance of AMB common stock and preferred stock to ProLogis shareholders in connection with the Topco merger, “FOR” the bylaw amendment, and “FOR” the charter amendment.

 

After careful consideration, the ProLogis board of trustees, by a unanimous vote of all of its trustees, at a meeting held on January 30, 2011, determined that the merger agreement and the transactions contemplated thereby, including the ProLogis merger and the Topco merger, are advisable and in the best interests of ProLogis and its shareholders, and approved the merger agreement. In reaching its decision, the ProLogis board of trustees consulted with ProLogis’ senior management and its financial and legal advisors, and considered a number of factors that the board of trustees believed supported its decision, including the following material factors: