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Bids, Mergers and Takeovers

Safestore to complete Space Maker deal

22 June 2016 07:35

Self-storage provider Safestore (SAFE) said it will complete the acquisition of Space Maker Stores (SMS) by 29 July for £44.4 million.

The acquisition is expected to be immediately accretive to group earnings per share from completion and will support future dividend capacity.

An initial consideration of £43m less certain downward adjustments to the enterprise value will be payable in cash on completion of the acquisition.

Up to £1.4m of deferred consideration may become payable in cash between six months and three years from the date of completion, subject to the SMS business achieving certain performance targets during that period.

Safestore has a strong operational knowledge of the SMS portfolio, having managed the business since 2010 under a management services agreement for which Safestore received £0.6m per annum.

The SMS portfolio was operating at 62% occupancy (of built out lettable area) at the end of April 2016, which Safestore believes it can improve once fully integrated into its own operational platform.

In the year to 30 April 2016, SMS delivered EBITDA (before management fees) of £3.9m on a turnover of £8.7m.

At the initial consideration price, the SMS portfolio has an implied first year net operating income yield of c.9.4% before the impact of management charges, which would rise to c.12% if the SMS stores achieve 80% occupancy at today's rental rate levels.

The SMS business, which had pro forma gross assets of £45.6m at 30 April 2015, will be acquired on a debt free basis with the total consideration expected to be c. £44.4m.

The acquisition will be funded from the group's existing debt facilities, with £45m of the group's £60m accordion facility converted into a committed revolving credit facility.

On a pro forma basis, the group's loan to value ratio post completion of this acquisition would be c.34% compared to 30% at 30 April 2016.

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Related Company: SAFE

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