By Senad Karaahmetovic
Extra Space Storage (NYSE:EXR) said today it agreed to acquire Life Storage (NYSE:LSI) in an all-stock deal valued at ~$12.7 billion.
Life Storage shareholders will receive 0.8950 of an Extra Space share for each Life Storage share they own, which translates into $145.82 per share based on Extra Space's share price close on Friday.
It was reported in February that LSI rejected the unsolicited proposal from rival Public Storage (NYSE:PSA) worth around $11B.
Following the completion of the deal, Extra Space and Life Storage shareholders are expected to own approximately 65% and 35% of the combined company, respectively.
"The business combination is highly synergistic, creating an even stronger combined company that will drive long-term, outsized operational and external growth opportunities through scale efficiencies, higher retained cash flow, data analytics, third-party management relationships and more,” Extra Space CEO Joe Margolis.
The combined company is expected to have a pro forma equity market capitalization of ~$36B and a total enterprise value of ~$47B.
"Following a deliberate and comprehensive review, the Life Storage Board unanimously concluded that the pending transaction with Extra Space maximizes value today and is the transaction most likely to deliver superior long-term returns for our shareholders,” Joseph Saffire, chief executive officer of Life Storage, said.
Kenneth Woolley will remain Chairman of the Board and Margolis will remain as CEO.
Stifel analysts said the price seems "fair".
"The offer from EXR shows, in our view, that the portfolio premium remains in effect for self-storage assets. And it is larger than we previously assumed. In addition, it shows that REITs are well positioned to grow assets in a time of constrained access to capital, by using other forms (shares, unsecured bond market, etc), provided their cost of capital makes sense and allows for accretive transactions (immediately or in the future)," they wrote in a client note.
Extra Space shares trade 7.4% lower on the EXR deal news.