"We are more convinced than ever that the combination of Public Storage and Shurgard is clearly good for all Shurgard shareholders," says Public Storage chief executive Ronald Havner in a prepared statement. "Our proposal would provide Shurgard shareholders with a substantial immediate premium and the opportunity to participate in the long-term growth of the combined company.
"We are disappointed that Shurgard's board continues to refuse to sit down with us to explore the potential of a mutually beneficial transaction, despite the overwhelmingly positive response from shareholders and analysts to our proposal. It remains our preference to work cooperatively with Shurgard to effectuate this transaction."
The merger would combine the two largest self-storage REITs. Shurgard operates a network of over 630 operating storage centers located throughout the US and Europe. Public Storage has interests in 1,480 storage facilities. In early July, Public Storage offered .80 shares of PSA common stock for each share of Shurgard, which represented a 14% premium over Shurgard's stock price based on the previous day's close for both companies.
This week, Public Storage explained that the offer is a substantial premium to all real estate metrics. As a result, Public Storage says its offer would be 12.5% accretive to Shurgard's 2006 FFO assuming no synergies, of which it expects there will be many.
"Although [Shurgard's] European operations have not achieved parity with the US, PSA's pricing assumes SHU achieves its 'Best Case' business plan," adds Public Storage in its report. "This value represents a historically low cap rate and high per square foot valuation and assumes as yet unrealized occupancy levels and operating margins."
Shurgard has not yet responded to the new report. When it rejected and declined to further discuss the issue on Aug. 1, said the company's board, with the help of financial and legal advisors, had reviewed the proposal and unanimously determined that Shurgard's current business plan offers shareholders greater long-term value.
"We believe...the proposal by Public Storage is clearly an opportunistic attempt to deprive our shareholders from fully realizing that long-term value," Barbo said. "Shurgard has the highest quality portfolio in the storage industry and is the leader in the developing European storage market. The success of our substantial European investments is increasingly evident, as same store occupancy rates in Europe increased from 75% at the end of the first quarter to 80% at June 30, 2005. "This proposal is good for Public Storage, but bad for Shurgard."
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