Bell Canada is partnering with a group of investors to buy data center provider Q9 Networks for $1.1 billion Canadian ($1.06 billion US), the company said today. It's the latest in a series of deals in which telcos have bought up data center companies to expand into the growing market for cloud computing services.
The deal is also a huge win for private equity firm ABRY Partners, which bought Q9 Networks in 2008 for $361 million. The transaction marks the second time ABRY has acquired a data center provider and sold it to a telecom provider for a substantial premium, a model previously followed in ABRY's 2007 purchase of Texas provider CyrusOne, which it sold to Cincinnati Bell in 2010 for $525 million. The deals provide compelling examples of why private equity firms have been focused on investments in the data center industry.
Q9 Networks has 11 data centers in the Toronto area, Calgary and British Columbia. The company will continue to be headquartered in Toronto and operate as a stand-alone entity under its new ownership. Existing Q9 management will continue operating the company, including Chief Executive Officer Osama Arafat and President & Chief Operating Officer Paul Sharpe.
Bell Canada teamed with an investor group including the Ontario Teachers' Pension Plan and private equity investors Providence Equity Partners and Madison Dearborn Partners. The investor will contribute $420 million of the equity portion of the deal, with Bell Canada providing $180 million.
"Q9 is a recognized leader in data centre services for business customers large and small, an ideal partner to grow our hosting and cloud-based business while leveraging our world-leading broadband network infrastructure," said Tom Little, President of Bell Business Markets. "Bell looks forward to working with our partners and to offering our national business customer base access to Q9's hosting and co-location services while delivering Bell's broadband network solutions to Q9's extensive client roster."
"Q9 looks forward to working with these leading private-equity firms and Canada's largest communications company, all of which have a strong track record of growing leading-edge companies like Q9," said Osama Arafat, CEO of Q9 Networks. "They recognize the value of Q9 and its team, an exceptional Canadian company dedicated to providing organizations with highly secure and reliable data centre infrastructure services."