TelecityGroup, Interxion to merge in effort to satisfy growing data center demands

TelecityGroup has reached a merger agreement with Interxion in an all-stock deal that will create a larger data center provider that can tackle the growing demand for cloud and colocation services.

Under the terms of the non-binding agreement, Interxion shareholders would get 2.3386 new TelecityGroup shares per Interxion share. Upon completion of the deal, Interxion shareholders will own about 45 percent, while TelecityGroup would hold 55 percent of the new company.

TelecityGroup has a strong presence in Europe where it operates data centers in major cities such as London, Paris and Frankfurt, while Interxion has 39 data centers in 11 European countries.

This merger creates a number of benefits to existing TelecityGroup and Interxion customers. By combining the two companies, they can provide customers a broader product set, more connectivity choices, more landing points for access to European consumers and expanded gateways in new markets in Africa, Asia and Eastern Europe. They will also be able to offer customers access to the combined portfolio of services across Europe.

"The combined business will allow the parties to provide customers with greater product choice and solutions for the dynamic and expanding needs of multi-faceted customers seeking to address global markets," said TelecityGroup in a release announcing the merger.

Leading the new company will be John Hughes, who will become chairman of the combined group, with John Baker serving as deputy chairman. The new board would consist of independent non-executive directors from both TelecityGroup and Interxion.

Joining Hughes and Baker will be David Ruberg, who will serve as CEO of the combined company for a 12-month period after the deal is completed. Ruberg will lead the new, combined group and launch this new phase for both TelecityGroup and Interxion.

TelecityGroup said that the merger, which will increase earnings from 2017, is "highly compelling" to the boards of both companies, with total cost and capital synergies estimated at about $913 million.

What's driving this merger is the growth of cloud computing and the need for expanded colocation facilities to support these services for business customers. According to Gartner, spending on cloud computing services will double to $285.7 billion in 2018 from 2014.

Interxion and TelecityGroup will not look for or discuss other bids from other companies until March 4, a date when the pair has to agree upon a binding transaction. Set to be completed in the second half of the year, the deal is subject to shareholder and regulatory approval. However, the two companies added that that there can be no certainty of a binding agreement or what the terms will be.

For more:
- see the release
- WSJ has this article

Related articles:
8x8 extends UK cloud service presence via Interxion partnership
Sprint extends Ethernet reach into Spain via Interxion
XO, Interxion sign onto CENX's Carrier Ethernet Exchange