Iron Mountain Inc. (IRM:US) soared the most since its public offering 16 years ago after approving a plan to convert to a real estate investment trust following pressure from activist investor Elliott Management Corp.
The stock advanced 14 percent to $32.32 at the close in New York, for the biggest gain since its market debut (IRM:US) in Feb. 1996. The Boston-based company, up 4.9 percent this year, was the top performer in the Standard & Poor’s 500 Index.
Elliott Management, a New York-based hedge fund, pushed the company to review its strategy and consider conversion to a REIT in March 2011. Iron Mountain generates the biggest portion of its income from renting storage space to customers in more than 64 million square feet of real estate around the world, Iron Mountain said in a statement yesterday.
“The REIT structure provides stockholders with dividends from U.S. tax savings and other increases in distributable income that will enhance stockholder returns,” Chief Executive Officer Richard Reese said in the statement. “Over time the new structure will facilitate distribution of profits covering approximately 90 percent of our global storage operations.”
REITs in the U.S. must distribute at least 90 percent of their taxable income to shareholders, and don’t pay corporate taxes on that amount.
Separately, Iron Mountain increased its quarterly dividend to 27 cents, from 25 cents, for the next six payments.
Elliott Management had about a 5 percent stake in Iron Mountain as of March 31, according to data compiled by Bloomberg.
Iron Mountain provides business storage and maintains documents including records, electronic files, medical data and e-mail. The company’s efforts to expand its international and digital businesses hadn’t generated enough returns, Elliott Management said last year.
Reese became CEO in April 2011, replacing Bob Brennan, who resigned. The management shakeup came a month after Elliott Management called for a strategic review and nominated a slate of four directors to the company’s board.
Iron Mountain instituted a so-called poison pill during the proxy fight, which the company resolved with an agreement to nominate Allan Loren, one of Elliott’s selections, to the board, and work with the hedge fund to select a replacement for Constantin Boden, a director planning retirement.
The company sold its digital business to Autonomy Corp. in June 2011 for $380 million cash.
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