Public Storage Inc. got some good news last week that could make its $5 billion purchase of rival public storage company Shurgard Storage Centers Inc. go smoother.
Shurgard reported fourth-quarter earnings that beat analysts’ expectations, posting a 7.8 percent year-over-year increase in same-store net operating income, an industry gauge for strength of operations.
But the real good news was that Shurgard got an “all clear” on its Sarbanes-Oxley assessment, according to Christy McElroy and Ross Nussbaum at Banc of America Securities, which was a financial advisor in the company’s sale to Public Storage.
The green light should make it easier for Glendale-based Public Storage to take advantage of the merger’s economies of scale and cut general operational expenses.
“The company no longer has internal control weaknesses,” they wrote in a March 21 note to investors. “This should enable a smoother integration and facilitate Public Storage’s ability to reduce (general and administrative) costs.”
When Public Storage agreed to buy Shurgard earlier this month, some Wall Street analysts balked at the price. Banc of America’s McElroy and Nussbaum believe in the long run the company will come out on top.
“However, we believe the long-term growth potential will be realized as the integration process gains momentum and synergies become evident,” they wrote in the report last week.
Global Meltdown
J2 Global Communications Inc. shares have dropped more than 10 percent this month after the e-mail and messaging service announced it will miss a deadline for filing its annual report due to a delay in the completion of an audit.
Auditors were reviewing the pricing of services by one of J2’s subsidiaries, which may lead to a possible change in the company’s net income for 2005. The change would reduce the company’s earnings per share by 7 cents or more, from $2.08 to $2.01 or less, according to the company’s statement.
The change would come in the company’s provision for income taxes, which would be increased by $1.9 million for fiscal year 2005. The change in the tax provision also will likely cause the company to report “material weakness” in its internal controls, according to the statement.
The misstep has come amid a good year for J2, which has seen its stock rise to nearly $50 per share from the low $30s. The company recently announced a stock repurchase program of up to 1 million shares over the next 18 months.
Nazarian Film Deal
Lions Gate Entertainment Corp. has signed a three-year contract with the film unit of Los Angeles nightlife business mogul Sam Nazarian’s SBE Entertainment Group in which Element Films will develop, self-finance and produce three motion pictures a year for wide release by Lions Gate.
The pact, announced last week, expands Vancouver-based Lions Gate’s pipeline of 18 to 20 theatrical releases a year with minimal financial risk while providing Element with a long-term distribution partner and a high level of creative autonomy. Under the deal, Nazarian’s Element Films will select six of the nine pictures. Each film will be produced by Element President Adam Rosenfelt, with the first film a romantic teen comedy called “The Prom.”
Element and Lions Gate, which has significant Los Angeles operations, earlier teamed on the teen comedy “Waiting,” a $3 million production that generated $16 million at the domestic box office and has shipped more than 2.5 million units on DVD, and on the upcoming thriller “Five Fingers.”
Financial terms of the deal were not disclosed.
Building in the Bayou
A partnership of Los Angeles-based KB Home and Baton Rouge, La.-based Shaw Group Inc. announced last week that it would build 75 homes in New Orleans.
KB Home/Shaw Louisiana LLC, established to provide permanent housing in Louisiana following the devastating hurricanes, signed a contract with HRI Properties Inc. of New Orleans to build 15 homesnear the historic Garden District. The homes will be priced from $130,000 to $140,000.
Reported by Emily Bryson York, Deborah Crowe and Andy Fixmer
