In the current economic situations many companies operating in different industries tend to mergers and acquisition. In this respect, self-storage companies are not an exception and the recent acquisition of Shurgard Storage Centers Inc by Public Storage Inc is good evidence supporting this trend. At the same time, it is worthy to note that the process of acquisition was quite difficult since interests of both companies had to be taken into consideration that naturally provoked certain disagreements between the participants of the negotiations.
On the one hand, Public Storage Inc aimed at the achievement its basic goal which may be defined as
the improvement of the position of the company in the market. To put it more precisely, this
acquisition provided Public Storage Inc with a possibility to enhance its position as the premier
self-storage operator in the market that would make this large company one of the leader of the
industry. Notably, the combined company would have ownership interests in over 2,000 quality
properties in 38 states and seven European countries.
At the same time, such acquisition was considered quite beneficial for the acquirer since the combined company would have a more active trading market for its security. It was also necessary to take into consideration that the acquisition of Shurgard Storage Centers Inc by Public Storage Inc would lead to the larger financial resources and the strong financial position of the combined company would facilitate expanded career opportunities for the best people from both companies.
It is noteworthy that the acquisition would lower general and administrative expanses which were important not only for the acquirer but also for the target company which was not in the best position in the market and aimed at the reduction of its expanses. The combined company also would have greater concentration of properties in faster growing markets, such as Southern California and South Florida.
Also it was very important that the financial capacity of the combined company would lead to a significant growth in Europe and the US without jeopardizing the company’s credit rating. In other words it would enhance the company’s credit ratings and access to capital that was really important not only for Public Storage Inc but for Shurgard Storage Centers Inc as well since, as it has been mentioned, its market position was getting to be quite problematic.
Actually, speaking about the benefits and the position of the target company, it should be pointed out that the final decision concerning the acquisition met its basic demands and interests. To put it more precisely, the acquisition led to the significant lowering of general and administrative expenses and reduced overall leverage. Furthermore, the acquisition provided new higher opportunities for revenues and expenses synergies.
Finally, it is necessary to remember about the interests of the shareholders. In this respect, shareholders of Shurgard Storage Centers Inc also turned to be in a beneficial position since they received immediate premium for their shares and they got an opportunity to participate in the upside potential of the combined company. In addition the acquisition provided opportunities for higher FFO per share growth and a more secure dividend with greater upside potential.
As a result, both companies came to the agreement and eventually Shurgard Storage Centers Inc was acquired by Public Storage Inc that turned to be beneficial for the acquirer and met the needs and interests of the target company.
Bibliography: Davis, A.M. “Public Storage Completes Acquisition of Shurgard Storage Centers”. CPN Magazine. Aug. 23, 2006. Retrieved Nov. 18, 2006 from <http://www.cpnonline.com/cpn/specialties/article_display.jsp?vnu_content_id=1003052343> Elphinstone, J.W. “Public Storage Appeals for Shurgard Shareholders”. CPN Magazine. Sep. 8, 2005 Retrieved Nov. 18, 2006 from <http://www.cpnonline.com/cpn/article_display.jsp?vnu_content_id=1001095205> Glendale, C. “Public Storage, Inc Announces Proposal to acquire Shurgard Storage Centers, Inc”. Business Wire. Aug, 1, 2005. Retrieved Nov. 18, 2006 from <http://www.globeinvestor.com/servlet/ArticleNews/story/BWIRE/20050801/20050801005488>
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