Equinix has announced an agreement to acquire UK-based Telecity for $3.6 billion, effectively beating out Interxion, which announced an all-stock bid for the company in February.
Under the terms of the agreement, Equinix offered $1.74 per share, with 87 cents payable in cash, representing a nearly 35 percent premium on Telecity's closing price on Feb. 10, the day before Telecity announced its planned merger with Dutch data center operator Interxion.
After meeting Telecity's shareholder approval and customary conditions, the two companies expect the acquisition to close in the first half of 2016.
Upon completion of the deal, Telecity shareholders will own about 10.1 percent of the combined company.
Telecity Executive Chairman John Hughes, who will sit on Equinix's board, said in a statement that the new agreement with Equinix is a good fit for his company.
"Having carefully considered all our options, the board believes this is a compelling offer and an excellent outcome for shareholders, employees and customers," Hughes said.
For Equinix, the key element of the deal is that it complements and expands its European footprint.
It will gain additional capacity in a number of major metros, including Amsterdam, London, Frankfurt and Paris. What's more, it will expand presence to key markets with additional cloud services and increased interconnection needs in Dublin, Manchester, Stockholm, Helsinki and Milan, while providing a launch pad for future growth in Eastern Europe and Turkey, Warsaw, Sofia and Istanbul.
"At Equinix our strategy is to drive our business based on the concept of a global platform and part of that is having facilities in the right locations, but beyond that it is being able to offer a consistent service to customers who have global requirements," said Eric Schwartz, president of EMEA for Equinix, during a call announcing the acquisition of Telecity. "For customers who have those sorts of global requirements, and particularly those who are operationally intent in connecting their operations and processes to align with ours to provide close cooperation the ability to expand our footprint into these new markets and existing markets is extremely attractive."
Schwartz added that Telecity customers will now be able to gain access into a number of other global markets.
"From the Telecity side, some of the customer feedback I received is that they have been able to work with Telecity across Europe and have seen that capability and service for some time, but now the opportunity exists to extend that to the U.S., Asia, Brazil and other markets," Schwartz said.
Hughes agreed with Schwartz's assessment, adding that Telecity will be able to tap into Equinix's cloud experience, particularly in the emerging hybrid cloud segment.
"Once this transaction closes it allows us to offer our European customers access to the Equinix assets in Asia and North America, whereas previously those customers were only able to make a decision to work with us in one or a number of European countries," Hughes said. "The other thing that customers are sensing is that Equinix has been investing very heavily in the whole cloud environment, while we have been investing in it as well but at a slightly slower pace so the opportunity to respond to hybrid cloud opportunities will be augmented by the integration of the two companies."
The company's proposed acquisition of Telecity is another illustration of its aggressive move to expand into international markets through a mix of organic network builds and acquisitions of other data center providers.
Equinix has been bolstering its hybrid cloud capabilities through its own internal efforts and by acquiring other players like Nimbo, a deal that gave the data center provider a new set of professional-services capabilities to help enterprise customers develop and implement hybrid cloud architectures.
At the same time it has also been expanding its data center reach. In March, Equinix announced it would open five new International Business Exchange (IBX) data centers in the coming weeks, increasing the scale of its platform by more than 10 percent. The new data centers will be opened in New York, Singapore, Melbourne, London and Toronto.
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