Real estate investment trust (REIT) Extra Space Storage said Monday it will acquire Life Storage for $12.4 billion in a deal that will result in the combined company becoming the largest U.S. self-storage space operator by store count.

The all-stock deal will offer the companies a "transformative scale" and cut costs, at a time when demand for storage space has waned from the heights of the pandemic, as people return to offices, and some analysts expect more consolidation in the sector.

Life Storage, which operates more than 1,150 storage facilities in 37 states and the District of Columbia, in February turned down a $11 billion all-stock takeover bid from Public Storage.

Public Storage said later in February it was "committed to pursuing a potential combination." The company did not immediately respond to a request for comment on Monday.

As part of the deal announced on Monday, Life Storage shareholders will get 0.8950 of an Extra Space share for each share held, representing a total consideration of about $145.82 per share, or a premium of 11.23% based on the stock's last close.

Life Storage shares were up 2.6%, while Extra Space shares were down 7.3% in premarket trading.

The deal will increase the size of Extra Space's portfolio by more than 50% by store count, according to the company. On deal close, Extra Space and Life Storage shareholders are expected to own about 65% and 35% of the combined company.

The board of Extra Space will be expanded from 10 directors to 12 and consist of three directors from Life Storage.REIT Extra Space's lead financial adviser was Citigroup Global Markets Inc, whereas Wells Fargo Securities and BofA Securities were Life Storage's financial advisers.