07-05-2015, 12:18 #1
[EN] Equinix offers £2.3bn for Telecity
Equinix, the largest US data centre group by market value, has made a £2.31bn offer for London-listed Telecity in an attempt to spoil its planned merger with Dutch rival Interxion and prevent the two becoming a strong European competitor.
On Thursday, Telecity revealed Equinix’s cash-and-stock approach, which values shares in the FTSE 250 company at £11.45 a share – a 27 per cent premium to its previous closing price.
News of Equinix’s bid may now flush out other offers for Telecity from rivals such as Japan’s NTT Communications and Digital Realty of the US, according to a person close to the process.
Data centre companies have been competing to tap into soaring demand for new services and storage, fuelled by the surge in mobile devices and cloud computing. For the largest global companies, Telecity – which was founded by British computing academic John Kelly and grew through acquisitions under chief executive Mike Tobin – represents one of the few remaining ways to increase market share in Europe.
Equinix’s offer consists of £1.25bn in cash and the remainder in Equinix shares – and is the latest in a series of approaches that the US group has made in recent weeks, said one person close to the matter.
On Thursday, Telecity said it had a fiduciary duty to consider the proposals, but added that “at this stage, there can be no certainty that any offer will ultimately be made for Telecity, or as to the terms on which any offer would be made”.
Nevertheless, shares in the UK company jumped 20.1 per cent to £10.80 in early London trading.
New York-listed Equinix confirmed its approach in a separate statement, saying a deal “would create a more compelling combination than the proposed merger with Interxion and would deliver greater value for Telecity shareholders”.
Equinix makes a significant proportion of its revenues is a major participant from providing data storage for financial services companies including trading firms and exchanges.
It already holds a strong position in Europe, operating critical data centres in places such as Slough, the southwest London suburb. Adding Telecity to its portfolio would give it new centres in locations including London’s Docklands financial district and Amsterdam.
However, Equinix’s bid may face some antitrust questions, analysts warned.
In February, Telecity had announced plans to acquire Dutch group Interxion for £1.6bn, in a deal structured as a merger but giving Telecity shareholders 55 per cent of the combined company. Its offer valued Interxion shares at a 15 per cent premium and the combined group would have had a market value of more than £3bn.
Analysts at Jefferies warned that a tie up between Telecity and Interxion would leave “Equinix . . . confined to a distant number-two spot in Europe. The enlarged business would compete with Equinix not only within Europe, but also for US order flows and for acquisitions. Why would Equinix not choose to nip this rival M&A in the bud?”
At the time, Telecity also announced a £400m share buy-back programme over three years. “If, heaven forbid, something were to preclude this merger, we are absolutely committed to this buy-back,” chairman John Hughes said.
Mr Tobin, the group’s former CEO, left abruptly last year, and people familiar with the situation suggested he had a tense relationship with directors over future strategy.
He was known for an unconventional leadership style, and once published a management book entitled Forget Strategy. Senior executives described corporate events that involved being “kidnapped” by former KGB agents, swimming with sharks and spending a night in an ice hotel.
Mr Tobin now holds only a 0.3 per cent stake in the group, according to Bloomberg, with banks and asset managers comprising its main shareholders.
Under UK takeover rules, Equinix has until June 4 to announce a firm intention to make an offer for Telecity.
Shares in Equinix have risen 38 per cent over the past 12 months to give the company a market value of $14.6bn. It recently changed its corporate structure to that of a real estate investment trust, or Reit, which gives it substantial tax advantages over many of its international rivals.
12-05-2015, 17:26 #2
Consolidation Will Cause Seismic Shifts in European MTDC Market in 2015
Telecity Is Only the Beginning
451 Research believes the appetite for colocation could create great divisions between industry leaders and smaller regional providers in Europe, with large players growing out market share, leaving the smaller providers to focus on diversification to survive.
New York, NY (PRWEB) May 12, 2015
451 Research today revealed new perspectives on the European multi-tenant datacenter (MTDC) market, which is undergoing a complete transformation. 451 Research analysts believe data regulation requirements, increasing demand for high-quality datacenter space, latency concerns, and a need to differentiate – with footprint, connectivity or services – will drive acquisition activity in this space in the near future.
According to 451 Research, this activity is likely to create new divisions between regional, international and pan-European wholesale and colocation providers, leading smaller players to focus more on services and areas of core competency to compete.
Consolidation is not restricted to MTDC operators. 451 Research expects M&A activity to also focus on service portfolios, skill sets, and network and cloud infrastructure as companies move into new countries and offer higher-value services.
Earlier this year, pan-European provider TelecityGroup announced its intention to purchase Interxion as analyzed here. The £1.44bn deal would be one of the largest ever undertaken in the European MTDC market. However, last week Equinix announced it might interrupt that deal as it is in talks with TelecityGroup about a possible takeover. If an acquisition is announced, it would be worth even more than the Telecity/Interxion deal.
451 Research estimates there are 27m square feet of operational datacenter space in Europe. Of that, Equinix claims 5.33%, TelecityGroup 3.7% and Interxion 3.5%. If Equinix were to acquire TelecityGroup, the new company would have a 9% market share across Europe, while a combined Telecity/Interxion would have 7% market share by operational square foot.
Furthermore, NTT recently announced its intention to purchase German wholesale provider e-shelter in a deal that would provide it with a strategic datacenter footprint in Frankfurt, Vienna, Zurich and Berlin. These deals alone will change markets not only in London and Germany but also other cities across Europe.
451 Research’s European Services channel predicts this is only the start of M&A activity in the European market.
451 Research projects the global colocation market’s annualized revenue to reach US$36bn by 2017, with an additional 7.4m square feet coming online by the close of 2017. Today, there are 3,796 datacenters operated by 1,094 companies in the 451 Datacenter KnowledgeBase, which tracks more than 100 data points and metrics for datacenter operators around the world. Of these, just over 42% (about 1,616 datacenters) are in Europe.
A majority of Europe’s markets are still served by regional providers, which offer local support and skills for each country or city but cannot compete for global reach and scale with larger providers entering their territory.
451 analysts predict one outcome of consolidation will be a new emphasis on emerging locations including Stockholm, Vienna, Madrid and Milan. Research indicates better economies of scale for those providers that do merge or acquire, the benefits of which could be passed down in the form of price reductions over time.
“Our analysis suggests that MTDC providers in Europe will become more cautious bringing supply to market – in some cases, these providers may choose to expand in partner colocation facilities where cloud or other nodes exist,” said Penny Jones, Senior Analyst – European Services, 451 Research. "We do not, however, expect to see huge revisions in build plans until 2016. Overall, the industry needs to be careful that such M&A activity – or expectations around it – does not lead to datacenter stocks becoming overvalued. A cautious approach will need to be taken to ensure key company stock is not put at risk."