PSA - Public Storage slightly higher offer for Life Storage strong probability -analyst

There's a "strong probability" that Public Storage ( NYSE: PSA ) could "slightly" increase its unsolicited offer for Life Storage ( NYSE: LSI ), according to a Truist analyst.

"While we believe a 17% premium for LSI is significant in and of itself, we think there is a strong probability of a slightly higher offer," Truist analyst Ki Bin Kim, who has a buy rating on PSA and $335 price target, wrote in a note on Sunday.

The comments come after Public Storage ( PSA ) on Sunday publicly revealed an unsolicited $11 billion all-stock offer for Life Storage ( LSI ) after it had made a few private attempts to engage with its small self-storage competitor.

There is cushion on an on an "effective yield basis" for Public Storage ( PSA ) to slightly increase its offer, according to Bin Kim.

"And high level, the deal is in effect pricing in a current choppy capital markets environment and a potentially decelerating NOI environment that has impacted equity valuations, which LSI’s board may hold a differing outlook," Truist's Bin Kim added.

Public Storage ( PSA ) fell 3.4% in premarket trading, while Life Storage jumped 12%.

Based on the M&A news in the sector there may be upside for CubeSmart ( CUBE ) and "slightly" less upside for Extra Space ( EXR ) and National Storage Affiliates ( NSA ).

Also see SA contributor King Lam Chan's piece from last week entitled "CubeSmart Vs. Life Storage: Why LSI Is A Better Buy In 2023."

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