US telco and ISP Windstream has agreed to sell its data centre business, Windstream Hosted Solutions, to cloud, co-location and managed services provider TierPoint in a US$575m all-cash deal. The agreement will see buyer and seller form a strategic partnership.
US telco and ISP Windstream (NASDAQ:WIN) has agreed to sell its data centre business, Windstream Hosted Solutions, to cloud, co-location and managed services provider TierPoint in a US$575m all-cash deal.
The agreement will see buyer and seller form a strategic partnership allowing them to sell their products and services to each other’s prospective customers through referrals.
The deal is not unexpected: in mid-September, Windstream CFO Bob Gunderman played down, but did not deny, rumours that the data centre business could be sold. He said that while data centre, cloud and managed services are “critical” to the company’s core business, they could potentially be provided via a third party.
It comes about six months after the Little Rock-based telco completed the spinoff of telecoms network assets into an independent, publicly traded REIT to help cut debt and unlock incremental cash flow.
Announcing the TierPoint deal, Little Rock-based Windstream said the structure will enable it to focus capital on its telecom business, while continuing to offer data centre services to enterprise customers – across a broader footprint. Windstream provides broadband, phone and digital TV services to consumers in mostly rural areas.
Windstream president and CEO Tony Thomas (pictured) stressed that data centre services will remain an “integral” part of the company’s enterprise service offering.
“We expect the divested data service business to continue its significant growth under the leadership of TierPoint, and we look forward to partnering closely with them to provide advanced data centre services to our enterprise customers.”
Jerry Kent, chairman and CEO of St Louis-based TierPoint, said his company is “very pleased to enter into a long-term strategic partnership with Windstream, allowing both companies to leverage the expertise and respective strengths of our organisations”.
Windstream received financial advice from RBC Capital Markets and legal counsel from Bryan Cave on the deal. TierPoint’s legal adviser was Paul Hastings.
Both companies’ boards have approved the deal, which they expect to close within two to four months, subject to customary conditions and approvals.
According to Windstream, Windstream Hosted Solutions generated revenue of US$30.5m in Q2 2015 and adjusted OIBDA of US$10.2m. It posted an operating loss, under GAAP financial measures, of US$2m.
TierPoint operates carrier-neutral data centres in the states of Washington, Texas, Oklahoma, Pennsylvania, Maryland, New York, Massachusetts, Connecticut and Florida. It was founded in 2010 via the combination of several regional data centre and IT solution businesses.
