Shurgard to acquire Lok’nStore in $474m deal to expand UK market presence

In a strategic move to bolster its market presence beyond London, European self-storage giant Shurgard has agreed to purchase UK-based Lok’nStore in a cash transaction valued at approximately £378 million ($474 million). This acquisition marks a significant expansion for Shurgard, as it looks to enhance its footprint in the lucrative South East and Manchester markets of the UK.

The terms of the acquisition stipulate that Lok’nStore shareholders will receive 1,110 pence per share, which represents a premium of 15.9% over the closing price of Lok’nStore shares on April 10, 2024, the last business day before the announcement. The premium extends to 36.7% over the three-month volume-weighted average price and 41.3% over the six-month period, showcasing the deal’s value to Lok’nStore shareholders. Additionally, this offer is 2.3% above the all-time high closing price of Lok’nStore shares, further emphasizing the attractive nature of the bid.

This acquisition allows Shurgard to significantly increase its market reach in two key target areas outside of London. Lok’nStore currently operates 32 properties in the South East with five under development, and five properties in Manchester, three of which are under development. By incorporating Lok’nStore’s existing assets and its secured development pipeline, Shurgard aims to enhance its growth profile from 67% to 90% occupancy in operating stores and similarly boost its development pipeline store occupancy.

Marc Oursin, CEO of Shurgard, commented on the acquisition, stating, “Following several successful acquisitions over the past year, I am excited to disclose this new acquisition in the UK, which doubles our presence in the country, and accelerates our growth and expansion strategy.” He highlighted the addition of 171,000 sqm of Maximum Lettable Area (MLA), representing two full years of Shurgard’s targeted annual expansion, and the potential for ramp-up and development opportunities in both existing and new UK markets.

The total all-in cost of the acquisition is expected to be €613 million, which includes the acquisition cost, secured development pipeline costs over the next three years, refurbishment capital expenditures, and transaction costs. Initially, the acquisition will be financed entirely through a bridge facility, maintaining a balanced financial policy with a pro forma leverage of 25% loan to value and 6.2 times net debt to underlying EBITDA. Shurgard anticipates the acquisition will create value through platform effects, expecting total estimated operating, G&A, and tax synergies of approximately €4-5 million in the first full year.

Andrew Jacobs, Chair of Lok’nStore, reflected on the agreement: “Lok’nStore’s board believes the offer represents significant value for Lok’nStore’s shareholders, recognizing the quality of Lok’nStore’s real estate portfolio and operational strength.” He praised the Lok’nStore team for their commitment to building a business recognized for its high standards and unique asset quality.

This acquisition by Shurgard signifies a strategic advancement in its ongoing growth and expansion efforts within the UK market. By leveraging Lok’nStore’s well-established market presence and development pipeline, Shurgard is poised to enhance its operational efficiency and market penetration, especially in high-demand areas outside of London. The move not only demonstrates Shurgard’s commitment to expanding its footprint but also its ability to effectively integrate valuable assets into its existing portfolio, promising robust growth and development prospects.