Big Yellow shares fall as Blackstone pulls out of two billion pound takeover talks

Shares in Big Yellow Group dropped sharply on Monday after Blackstone, the American investment giant, abandoned talks over a proposed takeover valuing Britain’s largest self storage operator at more than £2 billion. The FTSE 250 company saw its share price fall by 74p, or 6.4 percent, closing at £10.86 during the final minutes of trading as news of the withdrawn interest emerged.

The prospect of a deal had driven the share price up by approximately 13 percent since Blackstone’s initial interest became public seven weeks ago. With the price still trading above pre-rumour levels, there are concerns among shareholders of a further decline when the London market opens again.

Founded in 1998 by Nick Vetch and Jim Gibson, both of whom still serve as executive chairman and chief executive respectively, Big Yellow owns and operates 109 self storage sites across the UK. The founders are now in their mid-sixties, prompting speculation among investors about future leadership and succession plans.

Blackstone first declared in mid October that it was in the preliminary stages of assessing a potential offer for Big Yellow, whose market capitalisation stood at £1.9 billion at the time. Industry analysts suggested Blackstone would have needed to raise its bid closer to £2.7 billion to gain board approval. The Takeover Panel set an initial deadline of 10 November for a formal offer or withdrawal, later granting an extension to 8 December at Blackstone’s request.

Sources indicated that discussions between the two companies have now ceased, although neither Blackstone nor Big Yellow commented publicly. Market reports cited the potential impact of the upcoming UK budget as a factor contributing to Blackstone’s cooling interest. Blackstone has a history of targeting undervalued UK property firms with share prices trailing their asset valuations, as seen with its recent acquisition of Warehouse REIT shares.

Big Yellow continues to trade at a discount to its net asset value of £13.08 per share. For the financial year ending March, the company recorded a pre-tax profit of £115.6 million on revenues of £204.5 million, rising to £203.9 million when including revaluation gains on its property portfolio. The business holds the freehold or long leasehold on 99 percent of its sites, an asset base seen as highly attractive in the sector.

Industry analysts note that the self storage sector in the UK remains much less mature than in Australia or the United States. Estimates put the UK’s self storage provision at 0.89 square foot per person, compared to more than seven square feet per person in the US. Industry expectations are that the British market will see further growth and consolidation.

Big Yellow disclosed in November that it had met with a small number of other interested parties and had discussed various strategic options, including a full sale. With Blackstone now stepping away, investors will watch for the emergence of new suitors.