Storage Giants Merge in $12.85B Deal

Extra Space Storage Inc. and Life Storage, Inc. have announced a merger agreement, with Extra Space acquiring Life Storage. In this press release, the companies provide unaudited pro forma condensed combined financial statements for the year ended December 31, 2023, to reflect the impact of the mergers as if they had occurred as of January 1, 2023.

The total consideration transferred for the mergers amounted to $12.85 billion, consisting of common stock, OP units, cash for payoff of Life Storage credit facility and debt, and transaction costs.

The Pro Forma Combined Statements of Income for the year ended December 31, 2023, reveal a significant impact on various financial metrics:

  • Revenues: Property rental revenues increased from $2.22 billion to $2.76 billion after the merger.
  • Expenses: Property operations expenses increased from $612.04 million to $776.82 million, and depreciation and amortization expenses increased from $506.05 million to $771.44 million.
  • Income from operations: It decreased from $1.17 billion to $1.17 billion after accounting for transaction accounting adjustments.
  • Interest expense: It increased from $419.04 million to $537.66 million due to non-cash interest expense related to amortization of discount on Life Storage unsecured senior notes.
  • Net income: It decreased from $850.45 million to $702.63 million, with net income attributable to common stockholders dropping from $803.20 million to $661.31 million.

The adjustments for the Pro Forma Condensed Combined Statements of Income are based on the conclusion that the Mergers were accounted for as an asset acquisition under ASC 805-50, as substantially all of the fair value of the gross assets acquired was concentrated in a group of similar identifiable assets. The adjustments also consider potential cost savings expected from the mergers.

The press release also includes detailed information on the purchase price allocation, historical financial statements, and pro forma adjustments made to present the impact of the mergers.

As a result of these announcements, the company's shares have moved 1.2% on the market, and are now trading at a price of $146.32. For the full picture, make sure to review Extra Space Storage's 8-K report.

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