NEW YORK (MarketWatch) — Public Storage Inc. confirmed Tuesday it will acquire rival Shurgard Storage Centers Inc. for $5 billion, creating what the companies said would be the largest operator of self-storage facilities.
The all-stock deal values shares of Shurgard
at $65.16 each. In early action, the shares fell 20 cents to $63.40 on the New York Stock Exchange.
will issue about 38.4 million shares to Shurgard stockholders, with each share of Shurgard worth 0.82 shares of Public. Glendale, Calif.-based Public Storage, a real-estate investment trust, will also assume about $1.8 billion of Shurgard debt and redeem $136 million of preferred stock.
Public Storage’s initial, unsolicited bid in July for Shurgard shares was pegged at an exchange ratio of 0.8.
The merger will make Public Storage the largest self-storage company, with a market capitalization of $18 billion and interests in more than 2,100 facilities in 38 states and seven European countries, the companies said.
“This merger represents a win-win situation,” said David Grant, president and chief executive of Seattle-based Shurgard. “There are very few real-estate asset classes that are as scalable as self-storage and none that benefits as much from economies of scale.”
The Hughes family, members of which collectively own about 36% of Public Storage’s shares, agreed to vote their holdings in favor of the merger, the companies said. The deal requires majority approval by shareholders of both companies.
Goldman Sachs and Wachtell Lipton Rosen & Katz advised Public Storage. Citigroup, Banc of America Securities, Willkie Farr & Gallagher and Perkins Coie advised Shurgard.
The transaction’s expected to close by the end of the second quarter.
The deal makes sense strategically and operationally, according to analysts at Harris Nesbitt. However, “we remain concerned that the storage industry overall, which has enjoyed more than a year of strong operating fundamentals and easy quarterly comparisons, could slow as 2006 progresses,” they said.
Shares of Public Storage fell 0.8% early Tuesday to $78.86. It has risen about 23% since the first bid for Shurgard in July.
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