Shares in storage firm Big Yellow bounced on Wednesday after an activist investor urged the company to put itself up for sale.
The FTSE 250 self-storage provider jumped more than five per cent to 844p after Ancora Alternatives, which owns four per cent of the group, told it to consider a take-private deal.
The Ohio-based investment firm told shareholders that Big Yellow, the UK’s largest self-storage provider, is “full of trapped value”.
The storage group is trading at a 39 per cent discount to the value of its assets, the investor said, despite having a “highly resilient business model”.
Big Yellow offers storage across 113 sites in the UK, with its property estate concentrated around prime, main-road locations in London and the South East.
Ancora said a sale of the London-listed firm would be the “best risk-adjusted outcome for shareholders,” adding that there are a number of potential buyers who would snap up Big Yellow’s “premium London-based portfolio”.
The storage firm offers a more attractive asset to potential buyers than its US rivals because it would come at a cheaper price and offers rare access to high-value London properties, Ancora argued.
Big Yellow axes Blackstone talks
Big Yellow held sales talks with Blackstone last year but terminated discussions after the asset manager submitted an offer. Any deal for Big Yellow would come amid a wave of takeovers of UK property firms, whose valuable portfolios and sluggish share prices have made them a draw to private equity buyers.
Blackstone took control of Warehouse REIT for £489m in September last year, and FTSE 100 property investor Segro agreed to a £14bn takeover by US rival Prologis in August this year.
Big Yellow is currently suffering from “rising UK interest rates, sluggish GDP growth and a weak housing market,” which have stifled demand for domestic storage because Brits are moving home less often, Ancora said.
But the investor said the storage firm is well poised to benefit from “the possibility of an improved macroeconomic environment” in the UK and London.
“If the Company were to run a strategic review and solicit interest from all available parties, a transaction would likely occur at a valuation above Blackstone’s,” Ancora said.
Analysts at stock broker Peel Hunt said: “It is hard to argue against the quality of the business, and its portfolio.”
They added that the group’s share price “currently undervalues this quality and its medium-term prospects” but questioned whether a sale would “adequately” boost shareholder value.
Surrey-based Big Yellow was founded in 1998 and delivered a two per cent uplift in revenue to £209m in the year to March. Its profit before tax slipped by 38 per cent to £126m.
Big Yellow was declined to comment.