Extra Space Storage Inc. said Monday it has agreed to a merger deal with smaller rival real-estate investment trust Life Storage Inc. in an all-stock deal that will create an entity with a total enterprise value of about $47 billion.
Under the terms of the deal, Salt Lake City, Utah–based Extra Space Storage
EXR,
will pay 0.8950 of a share for each Life Storage share
LSI,
equal to about $145.82 per share, based on the stock’s closing price on Friday.
The REIT will own about 65% of the combined company, with Buffalo, N.Y.–based Life Storage owning the remaining 35%. The deal is expected to close in the second half and to increase the size of Extra Space Storage’s portfolio by more than 50% by locations.
“In total, the transaction adds over 88 million square feet to the portfolio. The combined portfolio represents the largest storage operation in the country with over 3,500 locations, over 264 million square feet and serving over two million customers,” the companies said in a joint statement.
Life Storage rejected an earlier unsolicited offer from Public Storage
PSA,
at $129 a share, the Wall Street Journal reported.
“This is an industry where scale really matters,” Extra Space Chief Executive Joseph Margolis told the paper in an interview Sunday.
The deal is expected to generate at least $100 million in annual run-rate operating synergies from general and administrative and property operating-expense savings. It’s also expected to boost core funds from operations, or FFO, a core metric in the REIT industry, in the first year after closing.
The combined entity is set to trade on the New York Stock Exchange under the ticker symbol “EXR.”
Kenneth Woolley will remain chairman, while Margolis will be CEO and a board member. The board will be expanded to 12 members from 10, with nine coming from Extra Space’s board.
Extra Space’s stock fell 6% premarket, while Life Storage shares were up 1.9%.
This post was originally published on Market Watch
