Self-storage firm Big Yellow should consider a sale, says activist investor

Big Yellow Group's shares rose over 5% on Wednesday following U.S. activist investor Ancora's announcement that it had acquired more than a 4% stake in the UK self-storage company. Ancora revealed that it believes Big Yellow to be significantly undervalued due to factors such as slow UK economic growth, a weak housing market, and a past failed bid to take the company private in 2025.

The activist investor urged the company's board to initiate a comprehensive strategic review, including the possibility of a sale process to potential strategic or financial buyers worldwide. Ancora noted that Big Yellow's shares are currently trading at a 40% discount to its net asset value and at a five-year low, with a price-to-forward EBITDA ratio of 14.6 times, well below the historical average of 21.1 times.

The activist investor estimated the company's intrinsic value at £12.36 per share, based on a 5.1% capitalization rate, indicating a potential upside of at least 54%. Ancora highlighted Big Yellow's 99% freehold portfolio and concentration in prime London locations as a competitive advantage, contributing to roughly 70% to 75% of the company's EBITDA from London stores.

The activist investor also suggested that Big Yellow could sell non-core assets, rebrand, or liquidate its smaller Armadillo brand, as well as capitalize on its property development pipeline to potentially boost share prices.