Windstream is shedding its data center business with plans to sell the assets to TierPoint, a cloud and managed service provider, for $575 million in cash, ending months of rumors about what it would do with the unit.
Earlier this year, rumors emerged that a deal for its data center business was forthcoming.
At that time, a report in Bloomberg said that the telco hired Royal Bank of Canada to help it sell the division with hopes of raising $500 million to $750 million.
Although it is selling off its data center assets, Windstream is not turning its back on its growing cloud and managed services customer base.
Under the terms of the agreement, Windstream said it will establish an ongoing reciprocal strategic partnership with TierPoint, allowing both companies to sell their respective products and services to each other's prospective customers through referrals. By establishing this structure, Windstream will be able to focus its capital spending on core telecom offerings while continuing to offer traditional data center services to enterprise customers across a broader data center footprint.
Tony Thomas, president and CEO of Windstream, said in a release that "Data center services will remain an integral component of our enterprise service offering."
Shaving off its data center services line will give Windstream a cash infusion as it moves forward with key projects like its 100G network expansion and enhancing its on-net fiber building reach.
The 100G network will enable it to more effectively serve its growing base of business and wholesale customers with plans to add 20,000 route miles and nearly 50 new carrier access points by the end of 2015. Meanwhile, the carrier plans to reduce its interconnection expenses by increasing its on-net fiber footprint in five markets in 2015.
After meeting customary conditions and approvals, the two companies expect the transaction to close in the next two to four months. The boards of Windstream and TierPoint approved the deal.
TierPoint is acquiring what has been a profitable business for Windstream. As of the second quarter of 2015 annualized revenues of the data center business were $122 million.
For more:
- see the release
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