Billionaire Nathan Kirsh thwarted in discounted move on Abacus Storage King

The fight for one of the country’s best known storage businesses has turned hostile, with the target company rejecting a low-ball $1.93bn bid by the billionaire who controls a majority of the company. 

Abacus Storage King has rejected a takeover bid.

Abacus Storage King has rejected a $1.93bn takeover bid from South African billionaire suitor Nathan Kirsh and the US heavyweight Public Storage, saying it undervalues the company.

The move by the ASX-listed company’s independent board committee had been expected, as minority shareholders were underwhelmed by the pair’s discounted offer at a time when storage assets are rising in value.

They were not keen on a price which analysts had pegged at a hefty discount to the storage fund’s underlying assets, and were worried their interests would be swept aside.

Kirsh’s Ki Group already holds an existing direct and indirect interest in the trust of about 59.47 per cent but is considered unlikely to be in a position to vote on its own proposal.

Abacus Storage has now released fresh valuations, which bolstered its portfolio and highlighted that the offer was at an even greater discount to prevailing prices.

Storage remains one of the most sought after areas of property, and the rejection on value grounds had been tipped as other players had already come into the takeover contest.

Most notably, rival company National Storage has taken a stake of about 5 per cent in the target company, potentially giving it a spoiler role or the ability to wring more out of the suitor.

The move will likely be supported by Abacus Group, which remains the manager of the storage fund and a substantial shareholder, with a 19.77 per cent interest.

The billionaire’s bid to take full control of the trust and install a new manager also showed his dissatisfaction with Abacus, and the company is separately considering the takeover proposal.

Mr Kirsh’s Ki Corporation had teamed up with US-listed Public Storage to buy out the minority shareholders in Abacus Storage but struck resistance due to the low pricing of the bid.

Abacus Storage said the bid did not reflect “compelling value” and, despite being at a premium to prior trading prices, it believes that the headline price of $1.47 did not reflect “fair value”.

Abacus Storage also announced a pro forma net tangible asset figure of $1.73 based on an independent valuation review. It said they were undertaken on a stand-alone basis and do not capture any premium to reflect the scale and significance of its portfolio.

The target also spruiked its potential development profits, brand and platform value and corporate costs. It added a tax condition by the bidders added to the deal’s completion and timing risk.

Abacus Storage said it would not provide the bidders with access to due diligence and effectively threw open the race for the company, saying it would consider any future proposals or opportunities.

Its shares were up 1.7 per cent to $1.52 in trading on the ASX, partly due to the risk of a stalemate. The Kirsh camp has warned market players there are few other avenues for the board if the consortium walks away. Competing bids face a steep hurdle due to the billionaire’s stake and he will not support a rival bid.

MA Financial analyst Edward Day said there was scope for the existing bidders to increase their offer commensurate with the increase in net tangible assets on the basis due diligence can be secured. “If that’s not successful, then there are several alternative options which could potentially include attempting to remove Abacus as manager of Abacus Storage and internalising those operations,” he said.

Mr Day said that the impact of higher valuations was dilutive to earnings given the incremental management fees and he lifted his target price to $1.59 reflective of the original $1.47, plus 8 per cent to adjust for the increase in asset value.

“There is clearly more water to flow under the bridge with regards to this transaction. However, this meaningful increase to net tangible assets might be enough to see Kirsh/Public Storage raise its bid or commence other strategies to unlock value,” he said.

Originally published as Billionaire Nathan Kirsh thwarted in discounted move on Abacus Storage King