Third time wasn’t the appeal for Public Storage (PSA). After non-public presents in December and January that had been rejected, the Glendale, CA-based self-storage REIT supplied the smaller Life Storage (LSI) a proposed share swap at $129 per share, or a 19% premium, for a complete of $11 billion.
Life Storage received again to them with a flat no.
The Life Storage board of administrators “unanimously concluded that the acquisition proposal submitted by Public Storage on February 5, 2023, considerably undervalues Life Storage and its prospects for future development and worth creation,” stated a press launch from the corporate. “This willpower follows a complete evaluate course of performed by the Life Storage Board in session with its impartial monetary and authorized advisors.”
As a result of the earlier non-public presents went nowhere with Life Storage’s board, Public Storage used an acquisition tactic during which it made the provide public as a type of strain by reaching out to shareholders. When the value supplied is effectively above the worth of the corporate, it’s known as a “bear hug” and appears to make a deal sound to shareholders like too good to go up.
Mark Barberio, non-executive chairman of the Life Storage board, stated within the assertion, “The Board believes Life Storage will ship higher risk-adjusted whole shareholder returns as a standalone firm than by means of the proposed transaction. The Board is at all times open to and often evaluates alternatives to reinforce shareholder worth and can think about any proposal that appropriately values the Firm and its prospects.”
On this case, Life Storage is framing the 19% premium as one thing aside from a particularly beneficiant provide that ought to be troublesome to go up.
The corporate’s board stated that it had “whole shareholder returns of practically 100% and quarterly dividend development of 80% since March 2019,” when Joseph Saffire grew to become CEO. The administrators additionally argued that it “has demonstrated sector-leading working efficiency, together with common similar retailer income and NOI development of 9.6% and 13.0%, respectively” and since 2019 has seen “similar retailer charges per occupied sq. foot by practically 38%.”
The board additionally stated that it’s positioned to develop funds from operations quicker than can be potential with the acquisition, pointing to a complete retailer rely up by virtually half in comparison with about 19% for Public Storage, although on condition that Public Storage is way bigger than Life Storage, it might be a problem to extend holdings by the identical quantity.
