BCE deepens data center presence with $1B Q9 Networks purchase

BCE (NYSE: BCE), the parent company of Canada's largest service provider Bell Canada, has led a group of investors to acquire data center provider Q9 Networks for CAD 1 billion (USD 960 million).

Joining BCE in this deal, reports the Globe and Mail, was the Ontario Teachers' Pension Plan, in addition to U.S. equity firms Madison Dearborn Partners LLC and Providence Equity Partners LLC.

Under the terms of the agreement, Teachers, Providence and Madison Dearborn provided CAD 420 million (USD 403 million), while BCE contributed CAD 180 million (USD 173 million) to fund the deal. Set to close later this year, the acquisition will also leverage new debt financing that Q9 previously put together.

Similar to moves made by Verizon (NYSE: VZ) and CenturyLink (NYSE: CTL) to buy Terremark and Savvis, respectively, Bell is also keen on getting a piece of the growing cloud computing and data center segments.

BCE currently operates six data centers with plans to provide data hosting and cloud services to its business customers. By purchasing Q9, it instantly gains 11 new data centers that are located in Western Canada, a group of assets that it would help it better compete against its main rival Telus (Toronto: T.TO).

Expanding its data center business in addition to its 4G LTE wireless network, IPTV, Fibe Fiber to the Home (FTTH) service and new satellite TV services, are part of its broader CAD3 billion capital investment plan for 2012.  

 "We're making a significant investment in an area called cloud services, which really talks about investments that companies are making in trying to manage their data," Cope told shareholders at the company's annual meeting.

This is not the first time that BCE used acquisitions to expand its data center and cloud services strategy. In 2010, the service provider purchased Quebec-based Hypertec Availability Services' hosting division.

Similar to CenturyLink and Verizon's respective acquisitions of Savvis and Terremark, Q9 will continue to run as a separate unit when the acquisition is complete. The company's founders Osama Arafat, Q9's CEO and Paul Sharpe, president and COO, will retain their current roles.

For more:
- Globe and Mail has this article

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