February 20, 2023

4 Min Read
Life Storage Rejects Public Storage All-Stock Takeover Bid

Update 2/20/23 – The Life Storage board of directors has unanimously rejected the takeover bid by Public Storage, saying the all-stock offer “significantly undervalues Life Storage and its prospects for future growth and value creation.” The board made its determination in consultation with independent financial and legal advisers, according to a press release. At the time of the announcement on Wednesday, the Public Storage proposal had an implied value of $126.14 per share, or about $10.7 billion.

“After further and careful consideration, the Life Storage Board of Directors continues to believe that Public Storage’s proposed exchange ratio significantly undervalues the company, and that the proposal is not in the best interests of shareholders,” Barberio said. “The board believes Life Storage will deliver greater risk-adjusted total shareholder returns as a standalone company than through the proposed transaction. The board is always open to and regularly evaluates opportunities to enhance shareholder value and will consider any proposal that appropriately values the company and its prospects.”

In outlining several factors that led to its conclusion, Life Storage championed its growth in net operating income compared to other self-storage REITs and Public Storage specifically. It also touted its ability to scale its portfolio “faster and more efficiently” than Public Storage. “Utilizing a strong and low-leveraged balance sheet, Life Storage has increased its total store count by nearly 50% since the beginning of 2019, outpacing Public Storage’s [approximate] 19% store growth over that time,” the release stated.

Meanwhile, Public Storage told Reuters on Thursday it had received “overwhelmingly positive feedback from both companies’ shareholders” since announcing its bid. “We are encouraged that Life Storage appears, for the first time, willing to shift towards good-faith discussions regarding our proposal and we look forward to concrete next steps in that direction,” company officials said.

2/7/23 – Public Storage Inc., a self-storage real estate investment trust (REIT) and management company, is proposing to purchase competing REIT Life Storage Inc. in an all-stock transaction. It’s offering 0.4192 shares of its own common stock in exchange for each outstanding Life Storage share, according to press releases from both companies.

The Feb. 5 public offer letter was sent to Mark G. Barberio, chairman, and Joseph V. Saffire, CEO, of Life Storage. It largely mirrors a similar letter that was sent privately to Life Storage on Jan. 12. Life Storage responded to previous outreach by saying the company is not for sale.

“Our proposal would create a combined company with significant advantages, more robust operational capabilities and a strong trajectory of profitable growth,” said Joe Russell, CEO and president of Public Storage. “Our compelling offer to Life Storage shareholders includes a substantial, immediate equity premium, a turbo-charged share of the combined company, and the opportunity to participate in the upside we intend to create together.”

The exchange of shares would be taxable to Life Storage equity holders. This would give the combined company a step up in the tax basis of the acquired assets, providing an enhanced ability to retain free cash flow and fund future accretive growth, according to the Public Storage release. Russell has urged the Life Storage board to “act in the best interests of its shareholders and enter into good faith discussions with us regarding the proposed transaction’s benefits.”

Life Storage said it is consulting with financial advisor Wells Fargo Securities LLC and legal advisor Hogan Lovells US LLP to review the proposal and determine the best decision for company shareholders, who are advised to take no action at this time. Public Storage is being advised by Goldman Sachs & Co. LLC and Wachtell, Lipton, Rosen & Katz.

Based in Buffalo, N.Y., Life Storage operates more than 1,100 self-storage facilities in 37 states. Its portfolio of owned and managed facilities comprises more than 81 million square feet.

Glendale, California-based Public Storage has interests in 2,836 self-storage facilities in 40 states, with approximately 202 million net rentable square feet. It holds a 35% interest in Shurgard, which has 259 facilities in seven European countries, with approximately 14 million net rentable square feet.

Life Storage, Life Storage Board of Directors Unanimously Rejects Unsolicited Proposal from Public Storage
Reuters, Life Storage Rejects $11B Takeover Bid From Public Storage
Life Storage, Life Storage Inc. Reviewing Unsolicited Proposal From Public Storage
Public Storage, Public Storage Proposes to Acquire Life Storage in All-Stock Transaction

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