Verizon Communications has reportedly kicked off the sale of its data centres in a process potentially worth over US$2.5bn. Telcos, which in 2011 went on a data centre acquisition spree, are now shedding those assets to focus on their core business. But based on the 14.6x multiple paid Equinix paid for Telecity last year, quality assets remain valuable.
Verizon Communications (NYSE:VZ) has reportedly kicked off the sale of its data centres in a process potentially worth over US$2.5bn.
Citigroup is running the sale, according to Reuters, which had reported in November that the giant was considering selling off its enterprise assets at a valuation of some US$10bn.
The assets now up for sale include 48 data centres currently contributing US$275m in annual EBITDA to Verizon, which has a market cap of US$189.2bn.
Last year, Verizon agreed a US$10.5bn sale of wireline assets to rural provider Frontier Communications, and a US$5bn sale and leaseback deal with American Tower.
Verizon CFO Fran Shammo dismissed the original report as “ridiculous” in November, but a month later did not rule out further disposals as part of its wireless-centred strategy. He also said that the company, which acquired AOL for US$4.4bn in mid-2015, would take a look at Yahoo’s core internet business under the right circumstances.
Data centres fall out of favour with mainstream telcos, but multiples among specialist assets remain high
Verizon acquired data centre provider Terremark for US$1.4bn in February 2011, the same month as Interxion’s US$264m New York IPO and Time Warner Cable’s US$230m acquisition of NaviSite. Two months later, CenturyLink agreed to acquire Savvis for US$2.5bn.
Five years later, though, data centres appear to be falling out of favour. Windstream last month closed its US$575m data centre sale to specialist TierPoint. The deal structure, said Windstream, would enable it to focus capital on its telecom business, while continuing to offer data centre services to enterprise customers via a referrals system.
AT&T and CenturyLink are also reportedly eyeing potential data centre sales.
In last year’s largest data centre deal, California-based Equinix agreed to buy the UK’s Telecity Group for £2.35bn (US$3.6bn), scuppering the target’s own previously agreed US$2.2bn purchase of Interxion. Equinix paid an EV/EBITDA multiple of 14.6x based on 2015 estimates, according to analysts at Evercore.
