Seattle-based Shurgard Storage Centers last week rebuffed an unsolicited $2.49 billion takeover bid from its largest competitor. So yesterday, Public Storage...
Seattle-based Shurgard Storage Centers last week rebuffed an unsolicited $2.49 billion takeover bid from its largest competitor.
So yesterday, Public Storage went public with its offer to buy Shurgard, in the hope that shareholders will pressure Shurgard’s board to relent and accept Public Storage’s proposal.
Wall Street investors showed their enthusiasm by pushing Shurgard stock above $55 per share yesterday. The stock closed at $53, up $6.10, or 13 percent, on the day.
“We are hopeful Shurgard shareholders will see the benefits of this transaction and communicate their views to the board of directors and senior management of their company,” Ronald Havner, chief executive of Public Storage, told investment analysts yesterday.
Public Storage is both larger and more profitable than Shurgard, with profits of $366 million in 2004 compared with $45 million for Shurgard.
A big reason for the higher earnings is Public Storage’s superior ability to fill its vacancies. Public Storage averaged 92 percent occupancy in the second quarter. Shurgard had a domestic occupancy rate of 84 percent and an international occupancy rate of only 66 percent in the first three months of the year.
The potential impact of a deal on Shurgard’s Seattle-based staff was not immediately clear, but jobs would likely be lost. Havner said repeatedly on the conference call that Public Storage believes a combined company would cut costs by reducing redundant expenses, from personnel to advertising.
Shurgard Storage Centers
Storage locations: More than 630 sites in 22 states and 7 European countries.
’04 sales: $426 million
’04 profit: $45 million
Headquarters: Glendale, Calif.
More than 1,460 sites
in 37 states.
’04 sales: $923 million
’04 profit: $366 million
Source: Securities and Exchange Commission filings
One Seattle-specific example: Havner said that Public Storage pays around $100,000 for a double-page ad in the yellow pages touting its 54 locations here, while Shurgard has a separate full-page ad for its more than 50 sites. A combined company would happily get by with one ad, he said.
Public Storage formally outlined its proposed acquisition in a letter to Shurgard July 8. That proposal called for each Shurgard share to be exchanged for 0.80 shares of Public Storage.
At Friday’s closing stock prices, such a transaction would value Shurgard stock at $53.40 per share, or 14 percent above Shurgard’s Friday closing price of $46.90.
Shurgard Chief Executive Charles Barbo sent a terse letter to Havner on July 26 saying that Shurgard’s board had “conducted a thorough review” of the proposal, and had “unanimously decided that [Shurgard] is not for sale.”
Barbo reiterated Shurgard’s rejection of Public Storage’s offer in a press release yesterday, after Public Storage filed the July 8 letter to Shurgard with the Securities and Exchange Commission.
“We believe our current strategic plan provides superior long-term value to our shareholders, and the proposal by Public Storage is clearly an opportunistic attempt to keep shareholders from fully realizing that long-term value,” Barbo said in a statement.
Havner declined to say whether Public Storage would launch a hostile-takeover bid for Shurgard if its entreaties to shareholders fails, but he did not rule it out.
“We’re pretty well aware of the options that are available to us,” he said. “Our sincere hope however is that the Shurgard board and management will sit down and talk with us about putting these two companies together.”
It is also not clear if another suitor could emerge for Shurgard.
Though Public Storage is the country’s largest storage provider, three others are also publicly traded.
A recent analysis by Lehman Brothers suggests the storage market is likely to see a wave of consolidation, since the top five companies in the industry represent only about 15 percent of self-storage facilities nationwide.
David Bowermaster: 206-464-2724 or email@example.com