California-based real estate investment company Prologis announced Monday its plans to acquire its rival Duke Realty for $26 billion. The warehouse giant said it will merge with its smaller rival through an all-stock deal.

The announcement comes just weeks after Duke Realty rejected an initial $24 billion buyout proposal from Prologis, claiming that it undervalued the company. For the current deal, the board of directors from both companies had agreed unanimously on the merger.

The latest offer represents a substantial premium over Duke Reality's share price as of Friday's close. The company currently has a market capitalization of around $19.1 billion. Since the start of the year, Duke Realty's share price has dropped by more than 24%, while Prologis has dropped by nearly 30% over the same period.

Under the agreement, Duke Realty stockholders will get 0.475 of a Prologis share for each Duke Realty share they possess under the terms of the transaction. The deal is scheduled to be completed in the fourth quarter.

Following the announcement, Prologis' stock dropped more than 6% in afternoon trading Monday, valuing the company at roughly $87 billion. Duke Realty's stock increased by more than 2% following the news.

Fears that demand for warehouse space may be dwindling as retailers' e-commerce activity declines from a Covid pandemic high have put pressure on industrial real estate owners. The Wall Street Journal reported last month that Amazon was considering subleasing at least 10 million square feet of warehouse space, as well as terminating or renegotiating some of its agreements.

This revelation alarmed investors in a market that had been soaring in previous years. Walmart, Target, and Dick's Sporting Goods have all invested in methods to leverage their stores as tiny fulfillment hubs closer to their customers' homes.

Amazon, Home Depot, and FedEx all employ Prologis' warehouses and distribution hubs, which total around 1 billion square feet. Duke Realty owns and manages over 160 million square feet of industrial real estate in 19 key logistics centers across the United States.

The deal would allow Prologis to acquire assets in major geographic regions and cities, including Southern California, New Jersey, South Florida, Chicago, Dallas, and Atlanta. Prologis reportedly wants to keep 94% of Duke Realty's assets and depart one market. Prologis has expanded its real estate footprint in recent years through acquisitions. In 2020, it purchased Liberty Property Trust, and in 2018, it purchased DCT Industrial Trust.

Apart from Prologis, another warehouse giant, Industrial Logistics Properties Trust has been expanding its network. Earlier this year, the company acquired Monmouth Real Estate Investment Corp. in a deal valued at around $4 billion.