Public Storage Makes $11 Billion Hostile Bid for Rival Life Storage

Public Storage, America’s largest operator of self-storage facilities, announced a hostile $11 billion deal on Sunday. Bid Life Storage Inc. is now trying to buy its smaller competitor after earlier attempts at taking over were unsuccessful.

Under the proposed all-stock deal, Life Storage shareholders would receive 0.4192 shares of Public Storage for each Life Storage share or unit, which equates to $129.3 per share based on Public Storage’s closing share price on Friday. Based on Friday’s 20-day volume weighted average stock price, the offer is 19 percent higher than its predecessor.

Life Storage’s proposed deal, which includes debt, would bring it to $15 billion. It would also be one of 2023’s largest takeovers.

Public Storage, Glendale, California, stated that Life Storage rejected an offer with similar terms in January. This forced the company to go public. Public Storage approached Life Storage for the first time in December.

“We have been disappointed that Life Storage’s board has refused to engage constructively with us. Life Storage explicitly wrote on December 29, 2022 that Life Storage is ‘not for sale,’ reaffirmed that stance in a January 31, 2023 letter without offering any avenue for further dialogue, and has been unresponsive to our outreach,” Public Storage said in a letter to Life Storage’s management.

Life Storage also stated that it will review the offer in a separate statement “determine the course of action that it believes is in the best interests of all shareholders.”

Public Storage said separately that its board has raised its quarterly dividend from 2.00 to 3.00 per share.

Greater Scale

The deal between the REITs would consolidate an industry that was fragmented and create a self storage giant with the scale needed to compete in a post COVID-19 market where self-storage property demand has declined as more people return to large cities.

Public Storage said the proposed combination would save costs and make Life Storage’s business more efficient.

Experts believe that Public Storage’s latest moves could put Life Storage on the market and make it attractive to other suitors, including large private equity firms such as Brookfield and Blackstone, who have been strong buyers in this space.

REITs are a promising spot for mergers & acquisitions in 2022. According to the National Association of REIT, they brought in $83 Billion in deal volume in 2022. This is the second highest figure for the sector, after 2007 according to the National Association of REIT.

Last year, Prologis Inc., the world’s largest warehouse operator, bought Duke Realty Corp for $26 billion. Prologis approached Duke initially, but Duke eventually accepted a sweetened deal.

Public Storage shares traded Friday at $308.47 per share. This gives the California-based company an estimated market value of almost $54.2 billion. Buffalo, New York-based Life Storage’s shares were at $100.58, giving it a market capitalization of about $9.4 billion.

Goldman Sachs & Co. LLC is serving as Public Storage’s financial advisor and Wachtell, Lipton, Rosen & Katz is serving as the company’s legal advisor.

Krystal Hu and Anirban S.