Public Storage Mounts $11B Takeover Bid for Life Storage
Largest self-storage REIT makes public all-stock offer for rival after LSI rejects private overtures.
In a move that would bring some consolidation to the fragmented self-storage sector, Public Storage (PSA) is mounting an $11B takeover bid for Life Storage (LSI).
PSA, the largest player in the self-storage sector with an estimated 9% market share, confirmed that it sent an unsolicited letter to LSI on Sunday offering its smaller competitor $129 a share in an all-stock deal to acquire LSI, which closed trading on Friday at about $111, the Wall Street Journal reported.
The offer, which comes after Life Storage rejected acquisition offers from PSA in December and January, would have an overall enterprise value of $15B when net debt is factored into the transaction.
Under the terms of the proposed deal, LSI shareholders would receive 0.4192 share of Public Storage stock for each Life Storage share or unit, representing a 19% premium based on the 20-day trailing volume-weighted average prices of the two companies as of Friday, WSJ reported.
Making the takeover bid public, as Public Storage did, is a tactic known on Wall Street as a “bear hug” aiming to put pressure on LSI by dangling the offer in front of the smaller company’s shareholders.
Public Storage, a REIT based in Glendale, CA, develops, owns and operates more than 2,800 self-storage facilities in the US. The REIT also owns 35% of Shurgard Self-Storage SA, a European company. PSA has a market cap estimated at more than $54B, about six times larger than Life Storage, which has a cap of $9.4B.
Both companies have been growing their footprints in recent months. In the first three quarters of 2022, PSA acquired 44 self-storage facilities in deals encompassing more than $500M, according to regulatory filing.
The largest self-storage REIT has been executing an acquisitions strategy of growing economies of scale from areas including third-party property management.
The rise of remote work and a surge in relocations from urban centers during the pandemic created a surge of investor interest in self-storage that peaked during H1 2022. In April, shares of Public Storage topped out at more than $400 a share; Life Storage shares peaked around the same time at $151.
Since their peak value, both stocks have lost about 15% of their value.