Public Storage tapped the corporate bond market last week to fund its acquisition of Simply Self Storage from Blackstone Inc. on the same day the purchase was announced.
The company sold $2.2 billion of bonds in four parts, according to a person with knowledge of the transaction, who asked not to be identified as the deal is private. The longest portion, a 30-year note, yields 1.43 percentage point over Treasuries after earlier discussions for around 1.8 percentage point, the person said.
The self-storage company became the latest to finance M&A with a debt offering quickly after disclosing the deal. In June, Nasdaq Inc., Earthstone Energy Holdings LLC and Civitas Inc. speedily sold debt after announcing their respective transactions. Prologis Inc., which came to the high-grade bond market last month, also announced its acquisition with a same-day turnaround.
It’s standard practice for financing to come through in about three to six months after a company announces a merger or acquisition, but the turnaround has been much quicker so far this year, according to data compiled by Bloomberg. The rapid dash to start a debt offering is likely due, in part, to economic uncertainty as the Federal Reserve hikes interest rates, muddying the outlook into the future. It’s a way to lock down financing ahead of any potential economic turbulence.
Bank of America Corp. and JPMorgan Chase & Co. managed Monday’s bond sale, which is expected to price later in the day.
Blackstone’s $68 billion real estate trust agreed to sell Simply Self Storage to Public Storage for $2.2 billion as the property vehicle grapples with investor withdrawals and upheaval in the commercial-property sector. The deal is expected to close in the third quarter.
The sale will generate more than $600 million in profit, according to Blackstone. With the storage deal, Blackstone Real Estate Income Trust has sold, or is under contract to sell, $12 billion of real estate at prices that are, on average, above carrying values, Blackstone said.
A representative for Public Storage didn’t immediately respond to a request for comment for this Bloomberg story.