(Corrects value of ProLogis in first and second-to-last paragraph to $8.7 billion from $5.7 billion. Corrects value of AMB to $5.7 billion, not $8.7 billion, in second-to-last paragraph. The errors first appeared in update 3.)

NEW YORK - AMB Property Corp struck a deal to buy rival ProLogis for $8.7 billion in stock, combining the two largest U.S. owners of warehouse and distribution centers in one of the biggest real-estate transactions since the financial crisis.

The agreement comes as ProLogis, the larger company, has struggled with debt. While both companies operate in the United States, the deal will give AMB, which also operates in China and Brazil, a large presence in the UK and Eastern Europe.

The companies called the deal a merger of equals, but some analysts said it amounts to a reverse merger with the smaller company taking on the identity of the bigger one.

There is no premium for ProLogis as its shareholders had expected. Its shares were down 1.6 percent after rising 12.8 percent last week when the merger talks were disclosed.

AMB and ProLogis serve customers who make or ship goods around the world and need a place to store them. The deal comes after a rough two years when tenants, especially in the United States, vacated properties because of poor global trade.

The companies' warehouses, sometimes the size of more than a dozen U.S. football fields, store goods from drugs to shampoo to car parts. The combined company's largest customer will be shipper DHL Worldwide Express BV. Others include Home Depot Inc and Unilever PLC.

As bigger entities, they have more clout to negotiate with their tenants, and once the market turns, nobody is better positioned than these guys to grow, said Morgan Keegan analyst Stephen Swett, who follows real estate investment trusts.

The company will be known as ProLogis. It will be based in San Francisco, home to AMB, but will have an operational base in Denver, ProLogis' headquarters.

The chief executives of AMB and ProLogis initially will be co-CEOs, but AMB CEO Hamid Moghadam will become sole CEO at the end of 2012 and will remain chairman. At that time, ProLogis CEO Walt Rakowich will retire.

The deal is the biggest ever for AMB, a 28-year-old company formed by Moghadam (the M in AMB) with board member T. Robert Burke (the B) and Douglas Abbey (the A).

By the end of 2012, AMB's chief financial officer, Thomas Olinger, will become CFO of the combined company.

AMB and ProLogis create investment funds that buy some of the leased warehouse properties. The companies earn fees from managing the funds and retain a 20 percent stake in the properties.

The combined company plans to sell out of some markets to fund expansion in others. It also plans to sell some of its vast land holdings, boost occupancy and expand their fund business, which combined is about $26 billion, Moghadam said.

In afternoon trading, AMB shares were up 1.3 percent at $33.35. ProLogis shares fell 1.7 percent to $14.95, down from a year high of $16.51 on Thursday after the merger talks were disclosed. Shares are up 63 percent from their 52-week low of $9.15 last July.

ProLogis owns or manages about 435 million square feet (40 million square meters) of real estate, mainly in the United States, Europe and Japan. AMB has about 158 million square feet (15 million square meters) of space in the United States, China, Brazil and Mexico.

The pact, expected to close by the end of the second quarter, may save $80 million annually, or about 20 percent of the companies' overhead, Moghadam said.

Neither CEO would say how long the two had been in talks or how many jobs would be cut.

The deal is also expected to make a company with a bigger balance sheet and lower cost of capital, Rakowich said.

The balance sheet will end up being stronger than the balance sheets of the individual companies, he said. That will take some time.

The combined company faces $390 million in maturing debt this year and $1.5 billion in 2012. It plans on extending that out a few years, Moghadam said.

But to get debt more in line with other REITs, the company may have to issue equity, said Steven Frankel, an analyst at Green Street Advisors, an independent research firm.

The company is expected to have a stock market value of about $14 billion, with AMB comprising $5.7 billion and ProLogis $8.7 billion, Moghadam said. Its total market capitalization, including debt and equity, would be $24 billion.

Under the terms of the deal, each ProLogis common share will be converted into 0.4464 of a newly issued AMB common share, the companies said.

(Additional reporting by Nadia Damouni and Martha Graybow. Editing by Derek Caney, Maureen Bavdek, John Wallace and Robert MacMillan)