Buyout Deals Rumored for Computer Sciences, ACS

Hewlett-Packard and the private equity firm The Blackstone Group are working together on a buyout offer for Computer Sciences Corp., the Wall Street Journal reported this morning, saying a deal price could approach $12 billion. The Journal story requires a subscription, but CNN has a summary.

That’s not the only deal cooking, either. The Journal says an investor group including Blackstone, Texas Pacific Group, Bain Capital and Silver Lake Partners could announce the acquisition of Affiliated Computer Services as early as Monday. Why all the suddent activity in the sector? The Journal’s analysis:

Private-equity players have been diving head-first into the business of computer outsourcing, in which corporations contract out their computer-maintenance and operations to the likes of CSC. The outsourcing companies generate huge streams of cash, a quality that private-equity firms seek because they can then put a lot of debt on the companies they acquire and produce greater returns for their investors. At the same time, though, these outsourcing companies are in a highly competitive market that is being transformed by low-cost providers in India and throughout Asia.

Both CSC and ACS operate significant networks of data centers, so any buyouts could lead the acquirer to assess the cost-effectiveness of the networks, particularly if the buyer (HP, for example) may have data centers of its own in some of those markets. Stay tuned … we should hear more about both of these deal stories in coming days.

Hosting.com Buys XO Irvine Data Center

Hosting.com has bought a California data center from XO Communications, the two firms have announced. Hosting.com, previously known as Express Technologies, did not disclose the sale price for the 36,000-square-foot square data center in Irvine, Calif. The company has existing facilities in Boston and its home base of Louisville, Ky. Hosting.com will add 15 positions as a result of the acquisition, according to president and CEO Darren King, who said the deal was financed by Harbinger Mezzanine Partners LP. He said the funding is in addition to the $3 million capital infusion Hosting.com received from the Nashville-based investment firm in early 2004.

The Irvine center, which was built at N+2 redundancy by XO, is only about 20 percent occupied at present.

Go Daddy Pays $9.5M for Phoenix Data Center

Domain registrar Go Daddy recently had a ribbon-cutting on its new Phoenix data center at 1402 E. Buckeye, a 270,000 square foot facility it recently purchased for $9.2 million. The site was previously owned by Sterling Properties, which runs the city’s major carrier hotel, the Downtown Phoenix Technology Center.

“We look forward to enriching our relationship with the city of Phoenix and the chance to be a part of its development,” said Go Daddy CEO Bob Parsons. “Both Phoenix and Go Daddy are growing at a rapid pace. It’s a great fit.”

Quality Buys Huge DeltaCom Data Center

Quality Technology Group LLC has bought a large Georgia data center from ITC^DeltaCom for $25.8 million, the companies said in a press release. ITC^DeltaCom has been trying for some time to sell the massive Suwanee, Ga. data center, which various reports cite as spanning 376,000 square feet.

Quality has been “rolling up data centers and tech office space for pennies on the dollar of their development cost,” according to the Kansas City Business Journal, which reports that Quality CEO Chad Williams has already bought data centers in Topeka, Wichita and Indianapolis and signed a 20-year lease on the former Cable & Wireless PLC data center in Lenexa, Kansas. The magazine reports that Quality is close to buying a data center in the New York market as well.