LONDON—U.S. data center operator giant Equinix Inc. on
Friday won a scramble to acquire U.K.-based peer Telecity Group PLC
in a cash and share offer worth £2.35 billion ($3.60
billion), cementing the industry's consolidation in Europe amid
swelling demand for digital services.
Equinix offered 1,145 pence per share, with 572.5 pence payable
in cash and the rest in stock, it said. The offer represents a
premium of approximately 35% to Telecity's closing price of 849
pence on Feb. 10.—the last business day before Telecity
announced a prior merger with Netherlands-based data center
operator rival Interxion Holding NV.
In February, Telecity said it would merge with Interxion to form
an operator with a combined value of $4.5 billion. But in May,
Equinix barged in with an offer of its own and Telecity said it was
obligated to consider it.
Following completion of the transaction with Equinix, Telecity
shareholders will hold approximately 10.1% of the combined group,
the firms said in a statement Friday.
Telecity's previous merger agreement with Interxion has ended,
Equinix and Telecity said.
At 0704 GMT, Telecity shares were down 0.1% at 1,089 pence,
valuing the company at £2.21 billion. Analysts said there
are investor concerns that the deal undervalues Telecity given the
company's rising commercial fortunes in an expanding sector.
Equinix said Telecity's executive chairman, John Hughes, will
join the Equinix board on completion of the deal.
"The addition of TelecityGroup's businesses will considerably
strengthen Equinix's offering to customers in Europe and beyond,"
said Equinix Chief Executive Stephen Smith.
The deal battle comes amid rising demand for data centers, vast
warehouses of computer and telecom equipment that power the
Internet. Driving the demand is the growing use of data on mobile
phones and of so-called cloud services—a catchall term
for files accessed remotely over the Internet.
As well as spending billions of dollars on their own data farms,
companies are increasingly outsourcing data management and
information technology handling to co-location operators such as
Equinix, Telecity and Interxion, where space is rented by rack,
cage or room.
Telecity operates in major European cities such as London, Paris
and Frankfurt. New York-listed Interxion has 39 data centers in 11
European countries. Redwood, Calif.-based Equinix, which has a
market value of over $14 billion and has technology and telecom
behemoths like Google Inc. and Vodafone Group PLC as clients, runs
more than 100 data centers world-wide.
Global Internet traffic will triple over the next five years,
according to networking-hardware specialist Cisco Systems Inc.,
with mobile data flow rising 11-fold between 2013 and 2018.
Cloud-computing spending will nearly double to $285.7 billion in
2018 from 2014, adds research firm Gartner.
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