US – After rejecting unsolicited buy-out overtures from self-storage REIT giant, Public Storage, for four months, the board of US self-storage REIT Shurgard Storage Centers has done an about-face and decided to explore the sale of the company.
California-based Public Storage had offered 0.80 of its common shares for each Shurgard share in a deal that represented a 14% premium on the Shurgard share price at the time of the offer in July.
When Public Storage publicised the $2.4bn offer a month later, Shurgard chairman and chief executive Charles Barbo said that the offer was "not the right deal" and that the company's board had determined that shareholder value would be best served by sticking to the company's current business plan.
Public Storage persisted during August and September, finally releasing a letter in late September warning Shurgard directors that shareholders owning more than 50% of Shurgard shares had met with Public Storage and had endorsed a merger deal.
Even with that not-so-veiled threat, Shurgard continued to reject the Public Storage bid, arguing that its own network of 680 storage centres in the US and Europe faced better growth prospects.
Last week, Shurgard's board finally authorised management to explore a range of strategic alternatives, including joint ventures and the outright sale of the company. Shurgard has commissioned Citigroup Global Markets and Banc of America Securities as financial advisers.
Barbo said that the board and management "had spent considerable time listening to our shareholders and believe that now is an opportune time to explore all strategic alternatives".
The change of stance would appear to bear out JPMorgan Securities analyst Michael Mueller's note last August that Public Storage "made this offer public in an attempt to prompt [Shurgard] shareholders to pressure its board to consider a deal".
He said that Shurgard had seen a rise in expenses owing to "accounting/control issues over the past few years".
However, other analysts said that Shurgard had anti-takeover defences that would make a hostile takeover unpalatable.
Nevertheless, the self-storage sector continues to perform well. Americans, it seems, are finding an increasing need for storage space, both for personal belongings and for business. According to the Virginia-based Self Storage Association, one in 11 Americans rents at least one self-storage unit, up from one in 17 in the mid-1990s.