US data centre group Equinix has approached Britain’s Telecity Group regarding a possible takeover, potentially scuppering Telecity’s acquisition of Netherlands-based Interxion Holding.
Telecity’s board has received a non-binding proposal from…
US data centre group Equinix has approached Britain’s Telecity Group regarding a possible takeover, potentially scuppering Telecity’s acquisition of Netherlands-based Interxion Holding.
Telecity’s board has received a non-binding proposal from Equinix of £11.45 per share – a 27% premium on its previous closing share price – which would be paid 54% in cash and 46% in Equinix stock.
Had Equinix not made this move, it would have been confined to a distant number two spot in Europe, competing with Telecity-Interxion on both sides of the Atlantic, Jefferies analyst Milan Radia said. He argued that therefore it made perfect sense for Equinix to buy Telecity.
Another equity analyst told TelecomFinance that the deal would be “great” for Telecity, since the combination with Equinix would be powerful, albeit expensive. The analyst suggested the Equinix takeover offered a better short-term gain for Telecity shareholders than a deal with Interxion.
“Given the rapid acceleration of M&A in the space, Equinix probably saw this as a last opportunity to grab significant market share,” the analyst said, adding that while it was bad in the short-term for Interxion, there would likely be future M&A opportunities.
In a statement, Equinix said it believed its takeover offer would create more value for Telecity’s shareholders than the Interxion merger. Investors appear to agree, as the British group’s stock has rocketed more than 18% today.
Equinix said Telecity would complement and extend its geographic footprint in Europe and enable “increased network and cloud density to better serve customers”. In particular, a Telecity takeover would allow Equinix to add capacity in Central London and Docklands. It would also extend Equinix’s reach to “new locations with identified cloud and interconnection needs” including Dublin, Helsinki, Istanbul, Milan, Stockholm and Warsaw.
In response to Equinix’s offer, Interxion released a statement of its own confirming that it had been released from the exclusivity obligations attached to its US$2.2bn sale to Telecity.
The terms of Telecity’s purchase, agreed in February, prevented either party from “soliciting alternative proposals and from discussing alternative proposals except in limited circumstances”.
Telecity’s board decided that Equinix’s approach was an exception, saying it was “required by virtue of its fiduciary duties to enter into discussions”, and has allowed the California-headquartered group to undertake a short period of due diligence.
Equinix has until 4 June to make a firm offer or walk away, Telecity said in a statement.
For its part, Interxion said it remained committed to the Telecity transaction, which has already received approval from Germany’s Federal Cartel Office. It added that it still believed the Telecity tie-up was a “strategically compelling combination” that would deliver “meaningful value” to Telecity’s shareholders and its own.
Equinix is being advised by JP Morgan. Telecity’s advisers are Goldman Sachs, Oakley Capital, Barclays and Greenhill & Co. Meanwhile, Perella Weinberg advised Interxion on its sale to Telecity.
