National Storage stake in rival Storage King a play to gain value

Abacus Storage King is being bought out for $1.47 per share ($1.9bn) by its major shareholder Nathan Kirsh and the US industry heavyweight Public Storage.

National Storage REIT’s move to acquire 4.78 per cent of its rival Abacus Storage King is seen around the market as a greenmail attempt by the Andrew Catsoulis business to extract a higher price or assets.

Abacus Storage King is being bought out for $1.47 per share ($1.9bn) by its major shareholder Nathan Kirsh and the US industry heavyweight Public Storage, which previously made a play for National Storage REIT before calling off the deal at the start of the pandemic in 2020.

Sources say there’s no bad blood between Public Storage and National Storage, and rather than trying to prevent it entering the Australian market by acquiring Storage King, it’s more likely a move to convince the target to sell it some of its assets or up the price so it can pocket a profit.

The two largely have assets in different markets here, so often do not directly compete.

Given the illiquid nature of the stock, the bet is that National Storage has likely been buying shares in its rival for some time, with a view they represented good value.

Ironically, before the Storage King demerger, Abacus bought shares in National Storage and many for years had touted a potential tie up of the pair.

Given that Kirsh, who owns about half the Abacus Storage King business with Abacus interests, would not be able to vote on the buyout due to conflicts of interest, there’s a view the stake gives National Storage enough votes to block a deal.

But market experts have played down the prospect of National Storage bidding for Storage King, because Public Storage would have far greater financial firepower to make rival offers.

Should the bid be sweetened, it may also add financial support to National Storage’s share price.

The company said in a statement it did not presently have intentions to make a competing proposal to buy the business and considered the stock to be a “compelling investment” at the prevailing price.

National Storage said that the consortium’s offer was well below Abacus Storage King’s net tangible asset value and what it considered fair market value for its extensive portfolio of high-quality storage assets, its management platform and the goodwill of the Storage King brand.

The Kirsh Group owns 51 per cent of Abacus Group and 39.6 per cent of Abacus Storage King.