Extra Space Storage Inc. (NYSE: EXR) and Life Storage, Inc. (NYSE: LSI) announced that the two companies have entered into a definitive merger agreement by which Extra Space will acquire Life Storage in an all-stock transaction for $12.7 billion. This transaction brings together two industry-leading platforms and the combined company is expected to have a pro forma equity market capitalization of about $36 billion and a total enterprise value of approximately $47 billion.
Under the terms of the deal, Life Storage shareholders will receive 0.8950 of an Extra Space share for each Life Storage share they own, representing a total consideration of approximately $145.82 per share based on Extra Space’s share price close on March 31, 2023. At closing, Extra Space and Life Storage shareholders are expected to own approximately 65% and 35% of the combined company, respectively. The respective boards of directors of both Extra Space and Life Storage have unanimously approved the transaction.
The deal will increase the size of Extra Space’s portfolio by over 50% by store count with the addition of Life Storage’s 1,198 properties, including 758 wholly-owned, 141 joint ventures, and 299 third-party managed stores. And in total, the transaction adds over 88 million square feet to the portfolio. This 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 combination of Extra Space and Life Storage is expected to result in significant strategic, operational, and financial benefits to shareholders such as:
1.) Combines 2 industry leaders with long track records of outperformance and creates the largest storage operator and the sixth-largest REIT in the RMZ. And uniting Extra Space’s and Life Storage’s leading technology and data analytics platforms will also enable the combined company to continue to drive same-store net operating income growth while providing exceptional service to customers.
2.) Creates a highly diversified portfolio of quality storage assets in markets benefiting from compelling demand and population demographic trends.
3.) The deal is expected to generate at least $100 million in annual run-rate operating synergies from G&A and property operating expense savings as well as improved property operating revenue and tenant insurance income. And Extra Space has a demonstrated track record of integrating stores onto its platform and delivering outsized returns to shareholders. Plus Extra Space will work closely with the Life Storage team to achieve anticipated synergies and intends to leverage Life Storage’s talented workforce.
4.) The combined businesses’ scaled and growing third-party management, joint venture, and bridge loan platforms will create a sophisticated pipeline for accelerated external growth.
5.) The deal is expected to be accretive to Core FFO per share within the first year of closing and be leverage neutral.
Extra Space is going to retain its name and continue to trade on the NYSE under the ticker “EXR”. And Kenneth W. Woolley will remain Chairman of the Board and Joseph D. Margolis will remain as CEO and Director. The Extra Space Board will be expanded from 10 to 12 directors and will consist of 9 directors from Extra Space’s Board and 3 directors from Life Storage.
The deal is currently expected to close in the second half of 2023, subject to the approval of Extra Space and Life Storage shareholders and satisfaction with other customary closing conditions.
KEY QUOTES:
“We are impressed with the management team’s strategic repositioning of the Life Storage portfolio over the last seven years, creating a highly diversified portfolio of quality storage assets in strong growth markets. The business combination is highly synergistic, creating an even stronger combined company that will drive long-term, outsized operational and external growth opportunities through scale efficiencies, higher retained cash flow, data analytics, third-party management relationships and more. We look forward to welcoming the Life Storage family to Team Extra Space and bringing our organizations together to drive enhanced growth.”
- Extra Space CEO Joe Margolis
“Following a deliberate and comprehensive review, the Life Storage Board unanimously concluded that the pending transaction with Extra Space maximizes value today and is the transaction most likely to deliver superior long-term returns for our shareholders. Together with Extra Space, we expect to accelerate growth while maintaining our customer-centric focus and commitment to continued innovation. We are also pleased that Life Storage shareholders will participate in the tremendous upside of the combined Extra Space and Life Storage platform through a significant ownership stake in the combined company. I want to thank the Life Storage team for their continued unrelenting dedication and commitment to our business and customers.”
- Joseph Saffire, Chief Executive Officer of Life Storage
