Public Storage Spins Sale of European Unit as Stock Spikes

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After years of failed attempts, Public Storage Inc. finally acquired rival Shurgard in 2006 for $5 billion in a deal widely viewed as an effort by the storage facility operator to break into the European market.

But last week the Los Angeles-based real estate investment trust turned around and sold off a 51 percent stake in its Shurgard European subsidiary to an unnamed investor. The price was “consistent,” it said, with the $1.1 billion the company had hoped to raise taking in an IPO that never got off the ground last summer.

Public Storage tried to put its best spin on the sale of Shurgard Self Storage Europe Ltd., Europe’s largest owner of self-storage units, with a spokesman maintaining that the company had really wanted Seattle-based Shurgard Storage Centers Inc. for its 500 domestic outlets.

Whatever the real intent behind the original acquisition, Wall Street and investors liked what they saw in the sale, which is expected to take some financial pressure off Public Storage while still leaving them with a big interest in Europe.

“We view this sale as beneficial,” said Jeff Donnelly, an analyst with Wachovia Securities. “Management seeks to maintain a material interest rather than incurring significant capital to build out the network.”

Investors agreed. Shares in Public Storage closed at $71.73 on Jan. 10, up 7.4 percent since the deal was announced the day before.

With the Shurgard acquisition, Public Storage presence in the U.S. grew to more than 2,000 properties, or about 6 percent to 7 percent of the entire market leaving it more room to grow.

Clem Tang, a spokesman for Public Storage, said the company now plans to focus its growth in the U.S. market, acknowledging the European unit required more capital to be successful.

“We feel the deal puts us in a very good position to take advantage of the opportunities here in the U.S.,” Tang added. “(And) while the European market represents a great opportunity for growth, the capitalization required to expand the operation and take advantage of that opportunity was more than were prepared to spend. This deal allows us to do both.”

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