NEW YORK (AP) — Shares of Iron Mountain climbed Thursday after the information storage and management company said it is moving ahead with its conversion to a real estate investment trust, which could reduce its taxes and increase returns for stockholders.
The company said it received favorable rulings from the Internal Revenue Service and said its board of directors voted to convert Iron Mountain into a real estate investment trust for 2014. The Boston company said it expects to make a special distribution of $600 million to $700 million to shareholders later this year.
Iron Mountain's special dividend will be paid primarily in stock. The company said it expects to make an annual distribution of $400 million to $420 million based on its 2014 earnings. The dividends Iron Mountain has already paid this year will be counted as part of that distribution. The company said it would have paid about $207 million in dividends in 2014.
Iron Mountain stock rose $5.83, or 19.6 percent, to $35.60 in morning trading.
Stifel Nicolaus analyst Shlomo Rosenbaum said the news "lifts a cloud of uncertainty that has surrounded the company in recent quarters," as Iron Mountain had spent about two years trying to become a REIT.
Iron Mountain Inc. announced in June 2012 that it would seek to become a REIT because the biggest portion of its income comes from renting out storage space in its real estate holdings. Investors like REITs because they return most of their profits to shareholders and don't have to pay taxes on those profits. However some REITs require investors to commit their funds for lengthy periods or to pay penalties should they choose to cash out.
The company said it received some positive news from the IRS in late 2013.