Equinix Makes £2.3bn Data Centre Bid For Telecity

US data centre operator Equinix has made a £2.3 billion offer to buy up UK data centre rival Telecity in a move which would see Equinix expand its footprint in the increasingly competitive European data centre market.

Equinix said in a statement to press today: “Equinix confirms that it is in preliminary discussions with the Board of TelecityGroup regarding a possible cash and share offer for TelecityGroup.”

The move would consist of 54 percent cash and 46 percent Equinix stock. TelecityGroup shares rose 23 percent following the announcement.

Rivalry

In February, Telecity announced a planned merger with European data centre provider Interxion in a move which would make the resulting company larger in terms of market share than Equinix in the European data centre colocation market.

Telecity originally said that the deal would bring “complementary strengths to fulfil the expanding product, service and geographic needs of our customers”.

But Equinix has now stepped into the ring and said that a deal between itself and Telecity would be “more compelling” than one between Telecity and Interxion.

Equinix said: “The Board of Equinix believes that this opportunity represents attractive shareholder value creation potential for Equinix, complementing and extending Equinix’s geographic footprint in Europe and enabling increased network and cloud density to better serve customers.”

TeIecity said in its own statement that the board of directors decided to enter discussions with Equinix after the proposal was “carefully considered”. Telecity said: “The Board of TelecityGroup has determined that it is required by virtue of its fiduciary duties to enter into discussions with Equinix and has decided to permit Equinix to undertake a short period of due diligence.

“At this stage, there can be no certainty that any offer will ultimately be made for TelecityGroup, or as to the terms on which any offer would be made.”

Reaction

Interxion reacted by stating that the original £2.2 billion deal with Telecity is still on the cards.

The dutch data centre company said: “On 9 March 2015, Interxion and TelecityGroup announced an agreement to implement a recommended all-share merger (the “Merger”) (the “Implementation Agreement”) which was unanimously approved by both boards. Interxion remains committed to the transaction with TelecityGroup on the terms as agreed by the parties, and both parties continue to work to progress the transaction”

But Interxion notes that Telecity’s entrance into merger discussion with Equinix releases Interxion from its exclusivity obligation with Telecity.

Equinix’s argument is that a merger between itself and Telecity would add capacity in Central London and Docklands that would boost the firm’s current operations in Slough. Equinix further said: “The acquisition would add capacity in several of Equinix’s current locations throughout Europe, and extend Equinix’s footprint into new locations with identified cloud and interconnection needs including Dublin, Helsinki, Istanbul, Milan, Stockholm and Warsaw.”

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