Saturday, November 25, 2017

Equinix buys Verizon’s data centre business in $3.6bn deal

Colo now owns 175 facilities, in 43 markets and approximately 17 million sqf across the Americas, Europe and Asia-Pacific markets.

Equinix has announced it has entered into a definitive agreement to purchase 24 data centres and their operations from Verizon Communications for $3.6bn in an all cash transaction.

The 24 sites consist of 29 data centre buildings across 15 metro areas. Of the 29 buildings, 21 are owned assets which made this an attractive deal for Equinix, the company’s CFO Keith D. Taylor told Data Economy.

Taylor said: “We are excited about what we acquired. What makes this an interesting move from a financial perspective is the fact that Verizon owns 85% of its assets. 21 of the 29 buildings are going to be owned assets which makes it a lot easier for us from a restructuring perspective when you own the assets.”

The transaction will be used to increase interconnection in the U.S. and Latin America with the hubs located in areas where Equinix did not have a presence, accelerating the company’s penetration of the enterprise and strategic market sectors, including government and energy.

The Verizon portfolio also gives Equinix three new markets in Bogotá, Culpeper and Houston.

In a letter to customers, CEO Steve Smith said the portfolio under the definite agreement between the company and Verizon will expand Equinix’s coverage to these new markets and increase colocation capacity across key markets for Equinix, including Atlanta, Denver, Miami, New York, São Paulo, Seattle and Silicon Valley.

The acquired portfolio includes approximately 900 customers and it adds approximately 2.4 million gross square feet.

Equinix’s total global footprint has now grown to 175 data centres in 43 markets and approximately 17 million gross square feet across the Americas, Europe and Asia-Pacific markets.

Taylor said: “We are delighted financially; it was a more attractive financial deal for us because we own more assets, people really wanted, it was a highly competitive process.

“We knew all the parties that were interested in this assets and we are happy that we came out on top.”

Tom Wells, partner at M&A and corporate finance advisory Arma Partners, told Data Economy: “As the largest Data Centre player globally, Equinix has significant synergy potential when it evaluates acquisitions.

“Whilst there are several other scale players in the US who would also benefit from sizable synergies, Equinix appears to have valued both the opportunity to enter new markets, as well as the existence of several new customer logos within the Verizon customer base.

“Materiality and ability to pay were probably also a factor in Equinix’s success.”

eqx-verizon-2The 29 data centre buildings across 24 sites in 15 metro areas, include Atlanta (Atlanta and Norcross), Bogotá, Boston (Billerica), Chicago (Westmont), Culpeper, Dallas (Irving, Richardson-Alma and Richardson-Pkwy), Denver (Englewood), Houston, Los Angeles (Torrance), Miami (Miami and Doral), New York (Carteret, Elmsford and Piscataway), São Paulo, Seattle (Kent), Silicon Valley (Santa Clara and San Jose), and Washington, D.C. (Ashburn, Manassas and Herndon).

The Miami hub also gives Equinix access to the NAP (Network Access Point) “a key interconnection point” which will become a strategic hub and gateway for Equinix customer deployments servicing Latin America.

Approximately 250 Verizon employees, primarily in the operations functions of the acquired data centres, will become Equinix employees.

CEO Smith said: “This unique opportunity complements and extends Equinix’s strategy to expand our global platform.

“It enables us to enhance cloud and network density to continue to attract enterprises, while expanding our presence in the Americas. The new assets will bring hundreds of new customers to Platform Equinix while establishing a presence in new markets and expanding our footprint in existing key metros.

“The deal will also provide significant value for shareholders as the proposed transaction is expected to be immediately accretive to our adjusted funds from operations per share upon close.”

Equinix was advised by Evercore, J.P. Morgan Securities LLC and Davis Polk & Wardwell LLP. Its shares rose 2.3% to $339.85 Tuesday morning after the deal’s announcement. Verizon shares were 1.5% to $50.48. The transaction is expected to close by mid-2017, subject to the satisfaction of customary closing conditions.

Wells said: “We believe that Equinix will continue to look for opportunities to expand its business in ways which add value. We can expect them to continue to be acquisitive to expand their global footprint and capabilities subject to any anti-trust limitations particularly in Europe.

“Equinix remains a smaller company relative to some of the other global technology giants. With the market expected to continue to grow strongly, we would expect that there is still the potential for the company to become considerably larger given the key requirement for data centre capacity to enable the digital economy.”

What the Equinix footprint will look like after Verizon data centres are incorporated into the colo’s portfolio.