Abacus Counts Takeover Benefits

Small Caps | Apr 14 2025

Abacus Storage King shareholders should be pleased about a takeover proposal, but questions arise over the opportunistic offer price.

-Abacus Storage King receives full takeover proposal
-Price opportunistic, but reasonable?
-Valuation discounts deep in storage sector
-Cross-shareholdings complicate the issue

By Greg Peel

Abacus Property Group acquired storage unit operator Storage King in 2020, having previously moved into the storage sector to complement its existing office portfolio. In 2023 Abacus spun out its storage assets into Abacus Storage King ((ASK)), with the remaining business listed as Abacus Group ((ABG)).

Last week Abacus Storage King received a takeover bid for the shares not already owned by Ki Corporation, owned by South African billionaire Nathan Kirsh's family office, and US-listed Public Storage, one of the largest storage owners and operators globally.

The bid price is $1.47 per share (under the usual indicative, non-binding etc conditions and subject to shareholder and regulatory approvals), which represents an -8% discount to Abacus Storage's net tangible asset (NTA) valuation but a 27% premium to the last traded price at the time.

Complicating the story are existing cross-shareholdings. Abacus Group holds a 19.77% stake in Abacus Storage, implying Ki Corporation owns 19.77% via its control of Abacus Group, while also directly owning 39.62% of Abacus Storage. If the deal proceeds, Ki Corp will own 50% of Abacus Storage and Public Storage the other 50%.

The transaction also assumes all management rights, currently held by Abacus Group, transfer to the new owners.

Public Storage has previously attempted to make inroads into the Australian storage market, having bid for National Storage REIT ((NSR)) in 2020. But this occurred right before covid and was thus abandoned.

The consortium of buyers has clearly outlined their reasons for the acquisition, highlighting Ki Corp's frustrations with the performance of Abacus Storage since the de-merger with Abacus Property, many of which would be shared by other Abacus Storage security holders, Moelis suggests.

ASK and ye shall receive

This is a positive outcome for Abacus Storage shareholders, Moelis believes, providing investors with an immediate opportunity to crystallise a price that otherwise might have taken a significant amount of time to achieve. That being said, Moelis still views the offer as somewhat opportunistic, given the -8% discount to NTA, and nil consideration for the management rights, though the latter is more impactful for Abacus Group security holders.

Given Ki Corp controls around 50% of Abacus Group, there is little bargaining power that would see the deal sweetened for Abacus Group. Moelis sees limited hope for a higher bid given the 40%-odd of the Abacus Storage register already owned by Ki Corp.

Yet, the bid price is below Abacus Storage's FY25 NTA of $1.60/unit, and Shaw and Partners considers the suitors should pay premium to NTA on account that book value does not capture the inherent worth of the market-leading Storage King platform.

The Storage King brand attracts enquiries from strong awareness among consumers, Shaw notes. The proposal does not consider the growth to ensue from FY27 as the Storage King platform is enhanced with a new, powerful dynamic pricing tool. Also not reflected in the current proposal price is that Abacus Storage's trans-Tasman portfolio of 200-plus stores would take decades to replicate, if possible.

Shaw adds to that the development pipeline which begins to have a meaningful impact on profits in FY27.

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