These alternatives include a sale of the company; formation of asset joint ventures with strategic partners; a sale of certain of its assets or operations; and continued implementation of Shurgard's strategic business plan. Shurgard cautioned investors Thursday morning that there could be no assurance that the exploration of strategic alternatives would result in any definitive agreement or transaction.
Citigroup Global Markets Inc. and Banc of America Securities LLC are serving as financial advisors in connection with these matters. Willkie Farr & Gallagher LLP and Perkins Coie LLP are acting as legal counsel.
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 immediately prior to the offer.
One month later, when news of the offer broke, Public Storage said the combined company could cut administrative expenses and add facilities in the US and Europe. Shurgard chairman/CEO Charles Barbo said its 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, and declined to discuss the offer any further. "This proposal is good for Public Storage, but bad for Shurgard," Barbo concluded.
Undeterred, Public Storage in early September issued a report on the financial benefits of the deal for Shurgard shareholders to examine themselves. "We are more convinced than ever that the combination of Public Storage and Shurgard is clearly good for all Shurgard shareholders," said Public Storage chief executive Ronald Havner in a prepared statement. "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."
By the end of the month, Shurgard Storage released a letter from Public Storage along with its own presentation on why its shareholders should continue to ignore the company's advances. The letter from Public Storage said its bid was based on information available to the public and asked Shurgard to provide additional non-public information to support its assertion that its offer was too low. Public Storage also warned that shareholders who collectively own more than 50% of Shurgard shares have told Public Storage they "strongly endorse" the idea of a merger between the companies.
"We suspect you have heard the same message, too," stated the letter signed by Public Storage chief executive Robert Havner. "As we have repeatedly stated, it is our preference to enter into a negotiated transaction with Shurgard. This will save both of our companies the time and expense of special meetings, proxy contests, litigation, unilateral exchange offers and other expensive and time-consuming measures."
In its presentation, Shurgard said the company is not for sale at Public Storage's offer price because its growth prospects in both the US and Europe are superior to PSA's. Moreover, it says a merger would reduce Shurgard's net asset value and its FFO growth.
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