Equinix will acquire Telecity Group for $3.6 billion in a cash and stock deal. The deal halts an earlier proposed merger between Interxion and Telecity Group.
Equinix will pay the equivalent of $17.55 a share in a combination of cash and shares. The board of directors of Telecity is expected to unanimously recommend that shareholders approve the Equinix deal.
The deal has several implications. Equinix is already the world’s largest data center player – it now greatly increases its position in Europe including in several new markets. Telecity operates close to 40 data centers in 11 countries in Europe with a market capitalization of over $2.6 billion.
The deal also prevents a merger that would have made Equinix the number two player in Europe. Telecity in February said it would buy Dutch rival Interxion in a $2.2 billion all-stock deal. The deal was attractive to both boards, with benefits including total cost and capital synergies estimated at about $680 million.
Equinix argued that it acquiring Telecity would create a more compelling combination.
For Equinix, The Telecity acquisition means increased network and cloud density to better serve customers, as well as a stronger platform to attract customers and pursue the emerging enterprise opportunity.
Equinix expects the transaction to enable accelerated deployment of cloud service provider nodes and to further the execution of Equinix’s cloud ecosystem strategy for EMEA.
In the United Kingdom, the acquisition of TelecityGroup adds capacity in Central London and Docklands that complements Equinix’s current operations in Slough. Telecity adds capacity in several of Equinix’s current locations throughout Europe, and extends Equinix’s footprint into new locations such as Dublin, Helsinki, Istanbul, Milan, Stockholm and Warsaw.
“Equinix can use Telecity to double down in the top four European markets and extend into new ones that have long-term potential,” said Jabez Tan, senior analyst, Structure Research. “Markets like Helsinki, for example, could be gateways to the wider Scandinavian region.”
Tan said that, while this transaction will certainly impact the competitive landscape in Europe, it’s not likely to spark a seismic consolidation wave. “The M&A landscape in Europe should continue to move incrementally and will increasingly be driven by strategic considerations,” he said. “One possibility is that we may see scaled players like Interxion think about building a US-based footprint to respond and M&A would potentially be one means to that end.”
Following Equinix’s original bid in May, Equinix had a 28-day period to make a solid offer or state its intensions to not acquire Telecity.