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Public Storage


tried making another overture to



Monday, but the result was the same.

Glendale, Calif.-based Public Storage told Shurgard's board in a letter that it remains interested in a deal and might even consider a higher price. But once again, Shurgard wasn't biting.

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Public Storage offered last month to acquire its rival self-storage real estate investment trust for $2.58 billion in stock. Shurgard shares surged 13% to nearly match the offer price, but Shurgard's board quickly rejected the proposal as insufficient.

But far from being deterred, Public Storage chief Ronald Havner only ratcheted up the pressure Monday.

"We met recently with Shurgard shareholders who collectively own more than 50% of your outstanding shares. Based on these conversations, the feedback we received was clear: your shareholders strongly endorse a transaction with Public Storage and hope you will facilitate a merger of our two companies," Havner wrote in a letter to the board released Monday. "Nevertheless, because you believe our price is insufficient, we will consider any non-public information which you can provide us to help justify a higher valuation. We are also willing to consider alternative forms of consideration and transaction structures."

But on its Web site Monday, Shurgard once again laid out why it thinks the deal is bad for its shareholders. Shurgard said its portfolio of U.S. and European assets is being undervalued and that Shurgard has better growth prospects than Public Storage. Shurgard also said its shareholders would see their dividend reduced by 28.6% under the merger.

Public Storage has in the past said Shurgard is at risk of cutting its dividend, since the company is on track to pay out more than it's earning this year. Analysts on average expect Shurgard's funds from operations, a common REIT performance metric, to be $1.96 a share for 2005. But the company's dividend amounts to $2.24 on an annualized basis for this year.

If Public Storage fails to win its case with Shurgard's management, which is protected by a poison pill, then the next step could be a battle for Shurgard's board of directors. In its letter Monday, Public Storage said it would rather not pursue this course.

"As we have repeatedly stated, it is our preference to enter into a negotiated transaction with Shurgard," the company said. "This will save both of our companies the time and expense of special meetings, proxy contests, litigation, unilateral exchange offers and other expensive and time-consumingmeasures."

On Monday, Public Storage rose 22 cents to $65.39, and Shurgard added 53 cents to $53.63.