Switch & Data Sale Slowed by Regulators
January 7th, 2010 By: Rich Miller
Colocation provider Switch & Data (SDXC) said today that its planned $700 million sale to Equinix will be delayed by a request for additional information from federal antitrust regulators. The transaction is now likely to close in the second quarter of the year, rather than the first quarter as additionally anticipated, the company said today in a filing with the Securities and Exchange Commission. Switch and Data said it will go forward with a Jan. 29 meeting at which its shareholders will be asked to approve the deal.
The acquisition of Switch and Data by Equinix (EQIX), which was announced Oct. 21, combines two of the largest players in the market for colocation and interconnection services, and gives Equinix a presence in 16 new markets across North America. Shortly after the deal was announced, Equinix submitted information about the transaction to the Antitrust Division of the Department of Justice and the Federal Trade Commission as required under the Hart-Scott-Rodino (HSR) Antitrust Act.
After consulting with regulators, Equinix re-filed its submission on Dec. 7, starting a 30-day waiting period for the antitrust review, which was to expire Wednesday.
“On January 6, 2010, Equinix received a Request for Additional Information (commonly referred to as a ‘second request’) from the Antitrust Division in connection with the Antitrust Division’s review of the Merger,” Switch and Data said in its filing. “This second request extends the waiting period imposed by the HSR Act until 30 days after Equinix has substantially complied with the second request unless that period is extended voluntarily by Equinix or terminated sooner by the Antitrust Division. Equinix intends to respond promptly to the second request and now expects the merger to close in the second quarter of 2010.”
The SEC filing did not discuss any details of the information request from regulators, or whether it would have any impact upon the deal beyond the planned closing date. Requests for additional information from regulators are not uncommon in large acquisitions.
In an Oct. 21 conference call, several Wall Street securities analysts wondered whether the deal might invite antitrust scrutiny.”Rest assured, we’ve looked hard at this,” said Equinix president and CEO Steve Smith. “We are taking a position that the North American hosting market is a competitive market.”
Equinix says it has “low single digit” market share of a broadly-defined market that includes web hosting providers as well as colocation and wholesale data center providers. But Equinix and Switch and Data are arguably the two largest players in North America in the narrower niche of carrier-neutral colocation and peering services.