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>>> Extra Space (EXR) to Acquire Life Storage in an All-Stock Deal


Zacks Equity Research

April 4, 2023


https://finance.yahoo.com/news/extra-space-exr-acquire-life-150503229.html


Extra Space Storage Inc. EXR has struck a deal to acquire Life Storage, Inc. LSI in an all-stock transaction. The move will result in the combined company becoming the largest storage operator in the country with more than 3,500 locations, more than 264 million square feet and serving more than two million customers. Life Storage earlier rejected a bid from the industry behemoth Public Storage PSA.

The move seems a strategic fit as within the first year of closing, the transaction is expected to be accretive to core funds from operations (FFO) per share and is also expected to be leverage neutral. The transaction is currently expected to close in the second half of 2023 and is subject to Extra Space and Life Storage shareholders’ nod and the satisfaction of other customary closing norms.

Shares of Life Storage were up 3.54% during Monday’s regular trading session, while shares of Extra Space were down 5.17%.

Per the agreement terms, shareholders of Life Storage will get 0.8950 of an Extra Space share for each share they own. Based on Extra Space's share price close on Mar 31, 2023, this represents a total consideration of roughly $145.82 per share. Public Storage earlier offered $129 per share for Life Storage, which was rejected by the latter, noting that the offer “significantly” undervalued the business.

The combined company is expected to have a pro forma equity market capitalization of around $36 billion and a total enterprise value of roughly $47 billion. When the transaction closes, shareholders of EXR are expected to own around 65% of the combined company, while shareholders of LSI are to own the rest 35%. Also, there will be an expansion of Extra Space’s board from 10 to 12 directors, comprising nine directors from Extra Space's board and three directors from Life Storage.

The transaction will increase the size of Extra Space's portfolio by more than 50% by store count. Particularly, it will add Life Storage's 1,198 properties — including 758 wholly owned, 141 joint ventures and 299 third-party managed stores — thereby adding more than 88 million square feet to the portfolio.

In addition to offering a “transformative scale” and enhanced diversification, the transaction is expected to generate at least $100 million in annual run-rate operating synergies from general and administrative and property operating expense savings, together with improved property operating revenues and tenant insurance income.

Based in Salt Lake City, Utah, Extra Space is a notable name in the self-storage industry and offers a vast array of well-located storage units to its customers, including boat storage, recreational vehicle storage and business storage. EXR is currently the second-largest owner and/or operator of self-storage properties and is the largest self-storage management company in the United States.

Here’s how the shares of Public Storage, Extra Space and Life Storage have performed over the past three months against the industry’s decline of 1.4%.

Currently, PSA, EXR and LSI have a Zacks Rank #3 (Hold).

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