Public Storage makes $11 billion hostile bid for Life Storage

By Krystal Hu, Anirban Sen and Jahnavi Nidumolu

(Reuters) – Public Storage (NYSE:), the biggest U.S. operator of self-storage properties, on Sunday unveiled an $11 billion hostile bid for Life Storage (NYSE:) Inc, ratcheting up makes an attempt to purchase its smaller rival after its earlier takeover makes an attempt had been rebuffed.

Beneath the proposed all-stock deal, Life Storage shareholders would obtain 0.4192 share of Public Storage for every Life Storage share or unit, which equates to $129.3 per share primarily based on Public Storage’s closing share value on Friday. The supply represents a premium of 19% primarily based on the 20-day quantity weighted common value of each shares as of Friday.

Together with debt, the proposed deal would worth Life Storage at about $15 billion, making it one of many largest takeovers of 2023.

Glendale, California-based Public Storage mentioned Life Storage had rejected a suggestion beneath related phrases in January, forcing the corporate to make its strategy public. Public Storage first approached Life Storage in December.

“We now have been disenchanted that Life Storage’s board has refused to have interaction constructively with us. Life Storage explicitly wrote on December 29, 2022 that Life Storage is ‘not on the market,’ reaffirmed that stance in a January 31, 2023 letter with out providing any avenue for additional dialogue, and has been unresponsive to our outreach,” Public Storage mentioned in a letter to Life Storage’s administration.

In a separate assertion, Life Storage mentioned it might evaluate the proposed supply and “decide the plan of action that it believes is in the very best pursuits of all shareholders.”

Public Storage additionally individually mentioned that its board of trustees has elevated its quarterly dividend from $2.00 to $3.00 per share.

GREATER SCALE

A deal between the 2 Actual Property Funding Trusts (REIT) would consolidate a fragmented business and create a self-storage big that will have the dimensions to sort out competitors in a put up COVID-19 world the place demand for self-storage properties has waned as individuals have began returning to massive cities.

Public Storage mentioned the proposed mixture would save prices and make Life Storage’s enterprise extra environment friendly.

The most recent strikes from Public Storage may doubtlessly put Life Storage in play and entice rival suitors that would embrace different REITs and huge personal fairness corporations like Blackstone (NYSE:) and Brookfield, which have been aggressive patrons in that house, based on consultants.

REITs had been a brilliant spot for mergers and acquisitions in 2022, bringing in $83 billion in deal quantity, the second highest for the sector since 2007, based on the Nationwide Affiliation of REIT.

Final yr, Prologis (NYSE:) Inc, the world’s largest warehouse operator, purchased Duke Realty (NYSE:) Corp for $26 billion. In that occasion, Duke had initially rebuffed the strategy from Prologis earlier than agreeing to a sweetened deal.

Shares of Public Storage traded at $308.47 every on Friday, giving the California-based firm a market worth of practically $54.2 billion. Buffalo, New York-based Life Storage’s shares had been at $100.58, giving it a market capitalization of about $9.4 billion.

Goldman Sachs & Co (NYSE:). LLC is serving as Public Storage’s monetary advisor and Wachtell, Lipton, Rosen & Katz is serving as the corporate’s authorized advisor.