Public Storage May Boost Offer

Public Storage Inc. expressed willingness Monday to raise its takeover offer for Shurgard Storage Centers Inc. and said the owners of more than 50% of Shurgard’s outstanding stock strongly endorsed a deal.

Public Storage, a Glendale-based real estate investment trust that owns self-storage facilities, made an unsolicited $2.5-billion bid for its smaller rival Aug. 1 even though Shurgard said it was not for sale. Seattle-based Shurgard has refused to discuss a transaction.

In a letter to Shurgard dated Friday and released Monday, Public Storage Chief Executive Ronald L. Havner Jr. said a higher offer was possible if Shurgard disclosed nonpublic information to justify a revised bid.

“We are hopeful that you will listen to the appeals of your own shareholders, recognize the value of our proposal and appreciate our willingness to negotiate with you in a flexible and open-minded spirit,” Havner wrote.

Public Storage has contended that a combination of the two companies would enable them to cut administrative and advertising expenses.

The companies operate self-storage facilities in many of the same markets. Together, they would own more than 2,100 storage centers in 38 states and seven European countries.

Bruce Garrison, a fund manager at Pinnacle Trust REIT Fund, which has invested in both companies, said he would vote in favor of the current Public Storage offer. But he said Charles K. Barbo, Shurgard’s founder, chairman and chief executive, had no intention of selling.

Pinnacle was not among the Shurgard investors that met with Public Storage recently.

Public Storage initially offered to exchange 0.8 share of its stock for each Shurgard share. At the time, the offer valued Shurgard at $53.40 a share, a 14% premium to its closing stock price July 29.

Public Storage shares were trading at $66.78 when the takeover offer was announced. They rose 28 cents Monday to $65.45, making the offer worth $52.36 per Shurgard share. Shurgard shares rose 87 cents to $53.97. They have traded as high as $57.45 since the offer was made public.

Public Storage said it preferred a negotiated deal to avoid the time and expense of special meetings, proxy contests, litigation and unilateral exchange offers involved in a hostile bid.

Green Street analyst Michael Knott said the matter might not be resolved without a takeover of the Shurgard board, which will be up for election next spring.

“I would be surprised if Shurgard is ever willing to do a deal,” Knott said. “I think it’s going to come down to Public Storage going through the declassified board format that Shurgard has now. All their directors get elected every year now. So Public Storage could substitute its own slate of directors.”

Shurgard has takeover defenses, such as a shareholder rights plans, or “poison pill,” that would make it prohibitively expensive for an unwanted suitor to buy the company.

No one at Shurgard was available to comment. But shortly after Public Storage made its letter to Shurgard public, Shurgard filed additional materials responding to its suitor. Among its objections is that the offer would create a tax burden for shareholders.