There’s a “strong probability” that Public Storage (NYSE:PSA) could “slightly” increase its unsolicited offer for Life Storage (NYSE:LSI), according to a Truist analyst.
“While we believe a 17% premium for LSI is significant in and of itself, we think there is a strong probability of a slightly higher offer,” Truist analyst Ki Bin Kim, who has a buy rating on PSA and $335 price target, wrote in a note on Sunday.
The comments come after Public Storage (PSA) on Sunday publicly revealed an unsolicited $11 billion all-stock offer for Life Storage (LSI) after it had made a few private attempts to engage with its small self-storage competitor.
There is cushion on an on an “effective yield basis” for Public Storage (PSA) to slightly increase its offer, according to Bin Kim.
“And high level, the deal is in effect pricing in a current choppy capital markets environment and a potentially decelerating NOI environment that has impacted equity valuations, which LSI’s board may hold a differing outlook,” Truist’s Bin Kim added.
Public Storage (PSA) fell 3.4% in premarket trading, while Life Storage jumped 12%.
Based on the M&A news in the sector there may be upside for CubeSmart (CUBE) and “slightly” less upside for Extra Space (EXR) and National Storage Affiliates (NSA).
Also see SA contributor King Lam Chan’s piece from last week entitled “CubeSmart Vs. Life Storage: Why LSI Is A Better Buy In 2023.”