Life Storage is to be acquired for $12.4 billion by Extra Space

An all-stock deal has been agreed upon between Extra Space Storage Inc. and Life Storage Inc. in which Extra Space Storage will acquire Life Storage for $12.4 billion. 

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The transaction will create a company that has a value of approximately $47 billion, including debt, as a result of the transaction, according to a statement issued on Monday. There will be a dividend of 0.8950 Extra Space shares for every Life Storage share owned by a shareholder of Life Storage.

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During the first half of this year, Life Storage's shares have increased by 33%, giving it a market value of $11.2 billion, a 33% increase. There was a 5% rise in the stock price in premarket trading in New York during the trading session. Extra Space was reported by Bloomberg News in March to be considering an offer for Life Storage as part of its acquisition strategy. 

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In February, Life Storage Corporation, which operates over 1,100 self-storage properties worldwide, rejected a bid worth $11 billion from Public Storage Corporation, saying that the offer undervalued the company "significantly".

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In the midst of the pandemic, self-storage real estate benefited because people wanted to work from home and needed more space to store their belongings. Nevertheless, as new supply from developers has started to enter the market, demand has begun to soften and pricing power has begun to wane as well.

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With the addition of Life Storage's 1,198 properties, Extra Space's portfolio will increase by more than 50% by store count with the addition of Monday's transaction, according to the statement.  

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The combined company is expected to be owned by about 65% and 35% of Extra Space's investors and life storage's investors, respectively, after the completion of this transaction. 

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Citigroup Inc. is Extra Space's principal financial adviser, with JPMorgan Chase & Co. also providing advice to the company. With Life Storage's help, Bank of America Corp. and Wells Fargo & Co. have teamed up.