Following on from its announcement in March, Safestore says the condition necessary to acquire Space Maker Stores Limited has been satisfied and completion of the acquisition is expected by 29 July 2016. The acquisition is expected to be immediately accretive to Group earnings per share from completion and will support the Group’s future dividend capacity.
An initial consideration of GBP43.0m less certain downward adjustments to the enterprise value (“initial consideration”) will be payable in cash on completion of the acquisition. Up to GBP1.4m of deferred consideration (“deferred consideration”) may become payable in cash between six months and three years from the date of completion, subject to the Space Maker business achieving certain performance targets during that period.
Safestore has a strong operational knowledge of the Space Maker portfolio, having managed the business since 2010 under a management services agreement for which Safestore received GBP0.6m per annum.
This acquisition will reinforce Safestore’s position as the leading operator in the UK by number of stores with a combined total of 110 stores(1) , 63 of which will be in London and the South East. The Space Maker 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, Space Maker delivered EBITDA (before management fees) of GBP3.9m (unaudited) on turnover of GBP8.7m. At the initial consideration price, the Space Maker portfolio has an implied first year net operating income yield of c.9.4%(2) 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 Space Maker business, which had pro forma gross assets(3) of GBP45.6m at 30 April 2015, will be acquired on a debt free basis with the total consideration (comprising the initial consideration and, if applicable, the deferred consideration) expected to be c. GBP44.4m. The acquisition will be funded from the Group’s existing debt facilities, with GBP45m of the Group’s GBP60m 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.
Notes:
- Includes the openings of new stores in Chiswick, Birmingham, Wandsworth and Altrincham later this year.
- Based on unaudited EBITDA before the impact of management charges for the year ended 30 April 2016 and including the impact of estimated cash to be acquired with the business.
- Includes the impact of a property valuation subsequently performed but which was not reflected in the April 2015 UK GAAP statutory accounts, but excludes interests in leasehold properties estimated at c.GBP10m, which would be offset in the balance sheet by an equal and opposite finance lease liability. UK GAAP gross assets at April 2015, before adjustment, were GBP17.1m.
SAFE : Space Maker deal immediately earnings enhancing says Safestore