Equinix to Buy Some Verizon Data Centers for $3.6 Billion -- Update
December 06 2016 - 11:14AM
Dow Jones News
By Drew FitzGerald and Austen Hufford
Equinix Inc. agreed to pay Verizon Communications Inc. $3.6
billion for a portfolio of 24 data center sites in a transaction
that will expand its operations deeper into more U.S. cities and
Latin America.
The all-cash deal, announced Tuesday, will boost Equinix's data
center count to 175 data centers around the globe, giving it
properties in 15 metro markets including Bogotá, Colombia as well
as Houston and Culpeper, Va. The transaction is expected to close
in the middle of next year.
Verizon joins several telecom companies that have cast off
underperforming physical assets to focus on services they consider
the core of their business. CenturyLink Inc. last month struck a
$2.3 billion deal to sell its data center business to a
private-equity consortium led by BC Partners.
Verizon has also has sold off parts of its landline operation to
Frontier Communications Corp. and cell tower assets to American
Tower Corp. in recent years while spending cash on Web companies
like AOL and Yahoo Inc.
Verizon Chief Executive Lowell McAdam said at an investor
conference Tuesday that Verizon didn't have very much scale in data
centers so it was better to sell them and put that money to better
use. The carrier wants to "trim the branches of the tree so the
tree can be stronger," Mr. McAdam said.
Many carriers have struggled to earn sales in buildings they
control because their rivals are wary of paying a competitor.
CenturyLink last year acknowledged revenue in its data center
business was declining.
But for Equinix, the acquisition of the slow-growing assets will
help build its footprint and expand its customer base. "All of the
assets to us are very strategic," President Karl Strohmeyer
said.
Equinix said the new data centers serve about 900 customers,
many of which are new to the company. The Redwood City,
Calif.-company runs a portfolio of data centers around the world
where Web companies and data carriers, including Verizon, hook up
to each others' networks. The landlord is a tax-advantaged
real-estate investment trust.
The deal is Equinix's biggest acquisition since its 2015
purchase of U.K. peer Telecity PLC, also worth about $3.6 billion
when the deal was struck.
Equinix executives said it has the capacity to pay for the
purchase on its own but will likely raise debt and equity.
Shares of Equinix rose 2.3% to $339.85 Tuesday morning, while
Verizon shares climbed about 1.5% to $50.48.
--Ryan Knutson contributed to this article.
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com and Austen
Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
December 06, 2016 11:59 ET (16:59 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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