Cincinnati Bell hopes to raise at least $264 million in the initial public offering (IPO) of CyrusOne, the company’s colocation and data center services business. Shares of CyrusOne will be offered at between $16 and $18 per share, the company said today, with the final price determined just prior to the start of trading. Although the company said it had “commenced the initial public offering,” the company was actually setting terms for the offering. A date has not been set for the start of trading.
Cincinnati Bell will sell 16.5 million shares of CyrusOne, which will trade on the NASDAQ stock exchange under the ticker symbol CONE. Underwriters Morgan Stanley and BofA Merrill Lynch will have the option to purchase up to 2.475 million additional shares of common stock from CyrusOne. If all these options are invoked and shares sell at the top of the $18 range, CyrusOne could raise as much as $341 million from the IPO.
Upon completion of the offering, Cincinnati Bell will own 71.6 percent of CyrusOne through its holdings of common stock and its interest in the CyrusOne LP limited partnership, which are exchangable for shares of common stock of CyrusOne.
Cincinnati Bell acquired CyrusOne in 2010 for $525 million, seeing colocation as a potential growth engine. The deal has paid off handsomely, and the IPO for CyrusOne could allow Cincinnati Bell to benefit from investor interest in the data center and cloud computing sector, while shifting significant capital expenses off the telecom company’s balance sheet.
CyrusOne’s strategy is built atop a base of 493 customers, including 108 members of the Fortune 1000. With its finished data center space now 85 percent leased, the company is aggressively expanding its footprint with a new fleet of facilities designed for phased deployment of customers and capital. CyrusOne plans to add a new revenue stream by providing interconnection services within its data centers.
CyrusOne’s property portfolio included 21 operating data centers in eight markets (Austin, Chicago, Cincinnati, Dallas, Houston, London, Singapore and South Bend) with a total footprint of 1.48 million rentable square feet of space and 105 megawatts of utility power.
Cincinnati Bell said that it may operate CyrusOne as a real estate investment trust (REIT), a corporate structure used by other large data center developers, and was analyzing that option. A REIT is a corporation or trust that uses the pooled capital of many investors to purchase and manage income property. Income comes from the rent and leasing of the properties, and REITs are legally required to distribute 90 percent of their taxable income to investors. Three of the largest data center developers – Digital Realty (DLR), DuPont Fabros (DFT)and CoreSite Realty (COR) – are organized as REITs.