Proposed Exchange Ratio of 0.4192 represents
19% VWAP premium; provides Life Storage shareholders with an
immediate equity premium and ability to participate in enhanced
growth, profitability, and value creation opportunities of the
combined company
Encourages Life Storage’s Board to engage in
good-faith discussions regarding the proposed value-maximizing
transaction following unwillingness to date
Public Storage (NYSE: PSA), the nation’s leading owner,
acquirer, developer, and operator of self-storage properties, today
sent a letter to Mark G. Barberio, Life Storage’s Chairman, and
Joseph V. Saffire, Life Storage’s CEO, copied in full below, with
respect to its proposal to acquire all of the outstanding shares
and units of Life Storage, Inc. (NYSE: LSI) in an all-stock
transaction.
Under the terms of the proposal, first made privately to Life
Storage in a January 12, 2023 letter, which is also copied in full
below, holders of Life Storage shares and units would receive
0.4192 shares of Public Storage common stock for each Life Storage
share or unit they own, which represents a 19% premium based on the
20-day trailing VWAPs of Public Storage and Life Storage as of
February 3, 2023. The proposed transaction would be structured to
be taxable to Life Storage equityholders, which would give the
combined company a step-up in the tax basis of the acquired assets,
providing an enhanced ability to retain free cash flow and fund
future accretive growth. Public Storage’s Board of Trustees has
unanimously approved the proposal.
As detailed in Public Storage’s January 12, 2023 letter, Public
Storage believes a combination of the two companies will result in
immediate benefits to Life Storage shareholders, and will unlock
superior near-, medium- and long-term growth and value creation
opportunities, including:
- Accelerated Growth and Profitability: Stronger organic
growth resulting in higher profitability as Life Storage’s
portfolio benefits from Public Storage’s industry-leading revenue
generation and expense efficiency. Public Storage’s same store
direct operating margin is approximately 80%, compared to 73% for
Life Storage. Following the transaction, Life Storage shareholders
would benefit from the higher income uniquely generated by Public
Storage’s platform.
- Platform Cost Savings: Platform efficiencies within an
industry where cost benefits of scale are well-demonstrated.
- Enhanced Ancillary Operations: Complementary
enhancements to ancillary operating platforms, including tenant
reinsurance, third-party property management, business customer
offerings, and lending.
- Expanded Portfolio Growth Opportunity: Public Storage’s
in-house development, redevelopment, and acquisition expertise and
higher net operating income generation unlock greater opportunities
externally and within Life Storage’s existing portfolio.
- Balance Sheet: Combined capacity to fund significant
future growth at a more advantageous cost of capital utilizing
Public Storage’s industry leading balance sheet and A / A2 credit
rating while maintaining prudent leverage.
“Our proposal would create a combined company with significant
advantages, more robust operational capabilities, and a strong
trajectory of profitable growth,” said Joe Russell, Public
Storage’s President and Chief Executive Officer. “Our compelling
offer to Life Storage shareholders includes a substantial immediate
equity premium, a turbo-charged share of the combined company, and
the opportunity to participate in the upside we intend to create
together. We have been disappointed that Life Storage’s board has
refused to engage constructively with us. Life Storage explicitly
wrote on December 29, 2022 that Life Storage is ‘not for sale,’
reaffirmed that stance in a January 31, 2023 letter without
offering any avenue for further dialogue, and has been unresponsive
to our outreach.”
“Public Storage has a long and proven track record of delivering
shareholder value through strategic growth, and we are confident in
our ability to deliver significant operating efficiencies and
capitalize on expanded ancillary and capital allocation
opportunities. We strongly urge the Life Storage board to act in
the best interests of its shareholders and enter into good faith
discussions with us regarding the proposed transaction’s
benefits.”
Public Storage also today announced that its Board of Trustees
has increased Public Storage’s regular common quarterly dividend by
50%, from $2.00 to $3.00 per share.
The full text of Public Storage’s February 5, 2023 and January
12, 2023 letters is included below.
Advisors
Goldman Sachs & Co. LLC is serving as Public Storage’s
financial advisor and Wachtell, Lipton, Rosen & Katz is serving
as Public Storage’s legal advisor.
Public Storage’s February 5, 2023
Letter to Life Storage
February 5, 2023
Mark G. Barberio, Chairman of the Board Joseph V. Saffire, Chief
Executive Officer Life Storage, Inc. 6467 Main Street Buffalo, NY
14221
Dear Mark and Joe,
We are writing to reiterate our proposal to acquire Life
Storage, Inc. for consideration consisting of Public Storage common
stock at an exchange ratio of 0.4192 shares of Public Storage
common stock for each outstanding Life Storage share or unit. Our
offer represents a 19% premium based on the 20-day trailing VWAPs
of Public Storage and Life Storage as of February 3, 2023. This
substantial offer provides Life Storage shareholders not only an
immediate, highly attractive equity premium, but also a superior
opportunity to unlock near-, medium-, and long-term growth,
profitability, and value creation.
We believe your shareholders deserve to be informed of our
proposed transaction and to have the opportunity to make their
views known, and we are making this letter public in light of your
refusal to engage in any meaningful dialogue, including your
declaration in writing on December 29, 2022 that Life Storage “is
not for sale.”
As we have stated multiple times, we admire your business and
respect the strides your management team and board have made,
particularly in recent years. Your success, coupled with Public
Storage’s proven ability to deliver industry-leading performance
through superior operational capabilities and strategic growth, is
the reason we are so confident in the unique opportunity this
proposal represents for your shareholders. Following the
transaction, your shareholders would own a combined business with a
diversified platform that is well-positioned for enhanced organic
growth, profitability, and portfolio expansion utilizing the
industry’s most recognized brand and strongest balance sheet.
We have made numerous attempts to engage in a constructive
private dialogue with you and your board over the past two months.
On January 12, we proposed to you in writing a transaction at an
exchange ratio of 0.4192 shares, which represented a 20% premium on
that day. Instead of meaningfully engaging with us, you sent a
letter on January 31 bluntly asserting that our offer is not in the
best interests of your shareholders without providing any
explanation or avenue for discussion. Your letter—and your lack of
response to our outreach since—clearly reflect the “not for sale”
stance communicated in your December 29 letter. We believe your
persistent unwillingness to engage in discussions regarding this
highly beneficial transaction is contrary to the interests of your
shareholders.
We would have preferred to work privately with you to reach an
agreement for the benefit of our respective shareholders, but given
your refusal to engage meaningfully, we believe making our proposal
public is now the most constructive approach. Your shareholders
deserve the opportunity to consider and communicate directly with
you regarding the substantial benefits of our offer.
Public Storage and our board consider this transaction to be an
important strategic priority. We have engaged Goldman Sachs &
Co. LLC and Wachtell, Lipton, Rosen & Katz to assist us in
completing this transaction. We believe that this transaction
provides a high degree of closing certainty and can be completed
quickly.
We stand ready to work with you immediately and to move forward
on the basis of our proposal. We strongly prefer to engage in
direct and constructive discussions to reach an agreement for the
benefit of your company. And we hope you, your board, and your
advisors are prepared to engage with us in the best interests of
your deserving shareholders.
Sincerely,
/s/ Joseph D. Russell, Jr.
/s/ Ronald L. Havner, Jr.
Joseph D. Russell, Jr.
President and Chief Executive Officer
Ronald L. Havner, Jr.
Chairman of the Board
Public Storage’s January 12, 2023
Letter to Life Storage
January 12, 2023
Mark G. Barberio, Chairman of the Board Joseph V. Saffire, Chief
Executive Officer Life Storage, Inc. 6467 Main Street Buffalo, NY
14221
Dear Mark and Joe,
We are writing to follow up on our December 22, 2022
conversation, during which we conveyed to you Public Storage’s very
strong interest in acquiring Life Storage, Inc. We appreciated our
conversation and the chance to discuss the merits of a combined
company. As discussed, we admire your business and respect what
you, your management team, and board have accomplished. We strongly
believe that our combined company would be one of the leading and
most well-regarded real estate companies and very well received by
the investor community.
We are proposing that Public Storage would acquire all of the
outstanding shares and units of Life Storage for consideration
consisting of Public Storage common stock at an exchange ratio of
0.4192 shares of Public Storage common stock for each outstanding
Life Storage share or unit. The proposed consideration has a
current value of $124.12 per Life Storage share/unit based on the
closing price of Public Storage common stock on January 12, 2023,
which represents a substantial immediate premium for Life Storage
equityholders of 20%. We propose to structure the transaction so
that it would be taxable for Life Storage equityholders, which we
believe would not be of concern to the majority of your
shareholders, so that the combined company would benefit from a
step-up in tax basis, with a corresponding enhanced ability for the
combined company to retain free cash flow to fund future accretive
growth.
Participating in the combined company on the basis of the
exchange ratio we are proposing will provide your equityholders
with the opportunity to share in all of the upside of the combined
company on a basis reflecting a proportional ownership interest
substantially greater than would be implied by our respective
underlying fundamentals. Put simply, the immediate equity premium
to be paid to your shareholders affords them a turbo-charged share
of the combined company and an equity investment far superior to
continuing as an investor in your stand-alone company.
Our proposed transaction will allow Life Storage shareholders
the opportunity to benefit from long-term value creation in a
combined company that will have several advantages, including the
immediate ability to:
- Increase significant operational efficiencies and economies of
scale, leading to improved margins on Life Storage’s portfolio and
enabling your shareholders to benefit from operational improvement
quickly;
- Expand the strongest brand in the industry, which when combined
with the leading digital customer experience, will enable more
robust customer acquisition and new customer growth;
- Retain and deploy a strong, low leverage, single-A credit rated
balance sheet, which will create significant external growth
capacity at a low cost of capital;
- Unlock additional capital allocation opportunities through
acquisitions with the combined company’s higher margins and lower
cost of capital, including providing your shareholders exposure to
our industry leading in-house development and redevelopment
capabilities;
- Combine our significant 65 million square feet of non-same
store portfolios, providing outsized cash flow growth; and
- Accelerate growth of ancillary operations, including tenant
reinsurance and third-party property management, and pair your
private owner lending platform with our strong balance sheet.
Our industry leading brand, balance sheet, and lower cost of
capital, combined with the significant operational efficiencies we
expect to achieve through the proposed transaction, will make the
combined company more profitable and nimble, driving cash flow and
value creation for the shareholders of the combined company.
Given the proposed transaction’s immediate and long-term
benefits, we feel very strongly that our proposed offer provides
Life Storage shareholders a more favorable alternative than its
current standalone strategy. We were surprised by your December 29,
2022 letter, which stated that “the Company is not for sale,” and
your call to request that we not provide you with the specific
terms on which we would propose a transaction. Hopefully you agree
that this proposal is compelling and merits serious consideration
and engagement by your board. We would certainly welcome the
opportunity to spend time with you and your Board to discuss our
proposal and walk you through why this is such a compelling
opportunity for your shareholders.
Our proposal provides a high degree of closing certainty and a
fast track to completion. We stand ready to enter into a
confidentiality agreement, commence our due diligence, and
negotiate definitive transaction documentation on a fast track. To
that end, we have engaged Wachtell, Lipton, Rosen & Katz as our
legal advisor on this transaction, and all of our internal and
external resources stand ready to move promptly to the next phase
of the transaction, including our completion of customary
confirmatory due diligence. This transaction is a very high
priority for our management team and Board of Trustees, which has
unanimously approved this proposal.
This proposal is based solely on public information, is
non-binding, and does not constitute an offer or a commitment to
submit an offer or to negotiate or enter into a definitive
agreement; the parties will not be legally bound with respect to
this proposal until execution of definitive transaction agreements,
if any, and subject to the terms and conditions expressed
therein.
* * * *
We and our advisors stand ready to engage with you and your team
as quickly and intensively as possible, and we look forward to
doing so, with a view towards delivering superior value to your
equityholders.
We would welcome the opportunity to meet with you as soon as
possible to discuss this compelling proposal further and answer any
questions you may have.
Sincerely,
/s/ Joseph D. Russell, Jr.
/s/ Ronald L. Havner, Jr.
Joseph D. Russell, Jr.
President and Chief Executive Officer
Ronald L. Havner, Jr.
Chairman of the Board
About Public Storage
Public Storage, a member of the S&P 500 and FT Global 500,
is a REIT that primarily acquires, develops, owns, and operates
self-storage facilities. At September 30, 2022, we had: (i)
interests in 2,836 self-storage facilities located in 40 states
with approximately 202 million net rentable square feet in the
United States and (ii) a 35% common equity interest in Shurgard
Self-Storage SA (Euronext Brussels:SHUR), which owned 259
self-storage facilities located in seven Western European nations
with approximately 14 million net rentable square feet operated
under the Shurgard® brand. Our headquarters are located in
Glendale, California.
Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements include statements relating
to any possible transaction between Public Storage and Life
Storage, expectations regarding outlook and all underlying
assumptions, expected acquisition, disposition, development and
redevelopment activity, supply and demand for self-storage
facilities, information relating to operating trends in markets
where Public Storage and Life Storage operate, expectations
regarding operating expenses, including property tax changes,
expectations regarding the impacts from inflation and a potential
future recession, Public Storage’s strategic priorities,
expectations with respect to financing activities, rental rates,
cap rates and yields, leasing expectations, Public Storage’s and
Life Storage’s credit ratings, and all other statements other than
statements of historical fact. Such statements are based on
management’s beliefs and assumptions based on information currently
available to management. All statements in this press release,
other than statements of historical fact, are forward-looking
statements that may be identified by the use of the words
“outlook,” “guidance,” “expects,” “believes,” “anticipates,”
“should,” “estimates,” and similar expressions. These
forward-looking statements involve known and unknown risks and
uncertainties, which may cause Public Storage’s or Life Storage’s
actual results and performance to be materially different from
those expressed or implied in the forward-looking statements.
Factors and risks that may impact future results and performance
include, but are not limited to those factors and risks described
in Part 1, Item 1A, “Risk Factors” in Public Storage’s and Life
Storage’s respective Annual Reports on Form 10-K filed with the
Securities and Exchange Commission (the “SEC”) for the year ended
December 31, 2021 and in other filings with the SEC. These include,
but are not limited to: (i) the ultimate outcome of any possible
transaction between Public Storage and Life Storage, including the
possibility that Life Storage will reject the proposed transaction
with Public Storage; (ii) uncertainties as to whether Life Storage
will cooperate with Public Storage regarding the proposed
transaction; (iii) the effect of the announcement of the proposed
transaction on the ability of Public Storage and Life Storage to
operate their respective businesses and retain and hire key
personnel and to maintain favorable business relationships; (iv)
the timing of the proposed transaction; (v) the ability to satisfy
closing conditions to the completion of the proposed transaction
(including any necessary shareholder approvals); (vi) other risks
related to the completion of the proposed transaction and actions
related thereto; (vii) changes in demand for Public Storage’s or
Life Storage’s facilities; (viii) impacts of natural disasters,
adverse changes in laws and regulations including governing
property tax, evictions, rental rates, minimum wage levels, and
insurance, adverse economic effects from the COVID-19 pandemic,
international military conflicts, or similar events impacting
public health and/or economic activity; (ix) increases in the costs
of Public Storage’s or Life Storage’s primary customer acquisition
channels; (x) adverse impacts to Public Storage or Life Storage and
their respective customers from inflation, unfavorable foreign
currency rate fluctuations, changes in federal or state tax laws
related to the taxation of REITs; and (xi) security breaches,
including ransomware, or a failure of Public Storage’s or Life
Storage’s respective networks, systems or technology.
Additional Information
This press release does not constitute an offer to buy or
solicitation of an offer to sell any securities. This press release
relates to a proposal which Public Storage has made for an
acquisition of Life Storage. In furtherance of this proposal and
subject to future developments, Public Storage (and, if a
negotiated transaction is agreed, Life Storage) may file one or
more registration statements, proxy statements or other documents
with the SEC. This press release is not a substitute for any proxy
statement, registration statement, prospectus or other document
Public Storage and/or Life Storage may file with the SEC in
connection with the proposed transaction.
Investors and security holders of Public Storage and Life
Storage are urged to read the proxy statement(s), registration
statement, prospectus and/or other documents filed with the SEC
carefully in their entirety if and when they become available as
they will contain important information about the proposed
transaction. Any definitive proxy statement(s) or prospectus(es)
(if and when available) will be mailed to stockholders of Public
Storage and/or Life Storage, as applicable. Investors and security
holders will be able to obtain free copies of these documents (if
and when available) and other documents filed with the SEC by
Public Storage through the website maintained by the SEC at
http://www.sec.gov.
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
This press release is neither a solicitation of a proxy nor a
substitute for any proxy statement or other filings that may be
made with the SEC. Nonetheless, Public Storage and its trustees and
executive officers and other members of management and employees
may be deemed to be participants in the solicitation of proxies in
respect of the proposed transactions. You can find information
about Public Storage’s executive officers and trustees in Public
Storage’s definitive proxy statement filed with the SEC on March
18, 2022 and Annual Report on Form 10-K filed with the SEC on
February 22, 2022. Additional information regarding the interests
of such potential participants will be included in one or more
registration statements, proxy statements or other documents filed
with the SEC if and when they become available. These documents (if
and when available) may be obtained free of charge from the SEC's
website at http://www.sec.gov.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230204005021/en/
Media Kekst CNC Jeremy Fielding / Lyndsey Estin /
Nicholas Capuano jeremy.fielding@kekstcnc.com /
lyndsey.estin@kekstcnc.com / nicholas.capuano@kekstcnc.com
Investors Ryan Burke rburke@publicstorage.com (818)
244-8080, Ext. 1141
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