Switch & Data Shareholders OK Equinix Deal

Shareholders of Switch & Data have voted to approve the company’s proposed acquisition by Equinix, the companies said Friday. Completion of the $700 million deal is delayed by pending approvals from federal antitrust regulators, and not likely to close until the second quarter. Switch and Data will announce the expected closing date in a press release five business days before the expected closing date.

Switch and Data (SDXC) recently moved to settle three lawsuits related to the sale to Equinix. A memorandum of understanding between Switch and Data and lawyers for plaintiffs would have all claims dismissed with prejudice in return for attorneys fees and costs, estimated at about $900,000.  

“Switch and Data and the other defendants deny all of the allegations in the lawsuits and believe that the existing disclosures regarding the proposed merger are appropriate under the law,” the company said in an SEC filing. “Nevertheless, Switch and Data and the other defendants have agreed to settle the putative class action lawsuits in order to eliminate the risk, burden and expense of further litigation, to fully resolve all claims raised in the lawsuits, to permit the merger to be consummated without the risk of injunctive relief or delay, and to permit Switch and Data’s stockholders to receive the consideration provided for in the merger.”

Switch & Data Sale Slowed by Regulators

A map of the combined data center footprint of Equinix and Switch and Data.

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.”

Switch and Data Had Another Suitor

The biggest deal in the data center industry for 2009 was the news that Equinix (EQIX) would acquire Switch and Data in a $689 million transaction. As the year draws to a close, we’re learning more about the behind-the-scenes maneuvering that led to the deal, in which Switch and Data (SDXC) spent months weighing competing bids from Equinix and an international provider.

The negotiations with the rival suitors, which began in earnest in April and concluded in late September, are detailed in an SEC filing by Equinix. The existence of a rival suitor for Switch and Data was first noted by Paolo Gorgo in an analysis at Seeking Alpha last week.

In January Switch and Data was approached by “a privately-held firm in its industry based outside of the United States” to discuss a possible business combination. This international company proposed a merger of equals with Switch and Data, which emphasized that it was not for sale but began discussions in March.

Equinix contacted Switch and Data in April to express interest, kicking off five months of talks. Equinix dropped out of the talks in mid May, but resumed discussions in early July. On Sept. 26, the Switch and Data board determined that the Equinix bid – which represented a 32 percent premium to its stock price – was the best outcome for its shareholders.

Who was the mystery suitor? Paolo notes that the description fits Interxion, which already had a joint marketing agreement with Switch and Data. At the time, we noted that the partnership “appears to be a competitive response to the growth of Equinix, which acquired IXEurope last fall, providing it with facilities in major Internet markets on both sides of the Atlantic.”

Equinix, Switch & Data Prep Integration

Teams arrived at Switch and Data Tuesday to begin integration plans for the company’s planned $689 million acquisition by Equinix. Switch and Data plans to file its proxy statement with the SEC by the end of November to give out more information surrounding the transaction for an overall vote expected to take place in the first quarter of next year. In the meantime, both companies are keeping busy, issuing a series of news announcements this week.

On Monday, enterprise video solution provider Kontiki announced that Equinix had selected their Enterprise Content Delivery Networking (ECDN) solution to deliver video content to every employee’s desktop worldwide.  Kontiki was deployed in a matter of weeks and will deliver high-quality video for training and employee communications. 

Equinix Adopts Kontiki
“As video becomes more ubiquitous throughout our company, we knew that we’d need a complete video infrastructure in place that could grow with our needs,” said Equinix CIO Brian Lillie. “We adopted Kontiki’s video solution portfolio based on ROI, scalability and ease of use.” 

Roundup: Equinix, Switch & Data, The Planet

Here’s a roundup of news announcements from the data center and hosting industry:

• Hibernia Atlantic expands to two Equinix data centers. Submarine transport cable provider Hibernia Atlantic announced Tuesday the expansion of its Global Financial Network(GFN) into the Equinix New York-2 and New York-4 data centers in Secaucus, New Jersey.  The expansion from Hibernia aims to provide low latency, redundancy and connectivity to global banks and exchanges in the New York metro area.  Hibernia’s GFN spans 24,000 Kilometers (14,913 miles) of fiber optic cables across key financial cities around the world.  “Our continued GFN expansion in New York metro and in other major financial centers reflects our core commitment to provide ‘security through diversity’—our company philosophy that offers world-class, redundant solutions to our financial customers,” said Bob McMann, VP of Provisioning and Procurement for Hibernia
• Switch & Data selected by Pragma Securities. Switch & Data announced that Pragma Securities, a trading solutions provider has selected their New York Financial EcoCenter to optimize the performance of its quantitative trading solution.  After an extensive diligence process Pragma selected the North Bergen, New Jersey data center to host its trading execution services, and will be one cross connect away from the other electronic trading customers in the site.
• Nimsoft introduces alliance program. Following the October launch of their Unified Monitoring Solutions, Nimsoft announced their charter members in the Unified Monitoring Alliance Tuesday.  The new monitoring solution provides a total, unified view of both internal and external IT resources.  The Unified Monitoring Alliance partners are made up of service providers, solution partners and technology development partners.  Partners like FusionStorm, Ingram Micro, Shavlik, Service-now.com, Rackspace and many others are among the first to join the alliance.  “The alliance not only expands opportunities for growth and collaborative innovation for our partners, but also effectively increases the breadth and depth of the systems monitoring and management solutions that Nimsoft offers to its customers,” said Nimsoft President Gary Read said
• The Planet signs Ayuda Networks. The Planet announced Tuesday that Ayuda Networks has signed on to join the company’s recently launched Partner Plus program.  Ayuda Networks consults with clients to evaluate connectivity requirements and implement the best solutions for their specific business.  Ayuda will add The Planet to its portfolio of top-tier solution providers and include them in recommendations to clients evaluating managed and dedicated hosting, as well as colocation services.

Switch and Data Still Building in Atlanta

Colocation provider Switch and Data (NASDAQ: SDXC) recently agreed to be acquired by Equinix (EQIX). Today the company is outlining plans to build out a large data center in downtown Atlanta. What’s up with that?

The construction project is moving forward because the Atlanta market figures in Equinix’ expansion plans. Atlanta is one of the five cities Equinix identified as key expansion markets where its existing customers are looking for colocation space and interconnection opportunities. Equinix doesn’t currently operate any facilities in Atlanta, but Switch and Data has a data center at the city’s primary carrier hotel at 56 Marietta, as well as the expansion space it leased last year at 180 Peachtree Street .

The presence at 56 Marietta provides the network connectivity that is central to the Equinix business model, while the 79,000 square feet of space at Peachtree Street adds the larger footprint typical of Equinix’ big-city approach. Switch and Data will interconnect the new site to its 27,000 square foot data center at 56 Marietta, providing immediate access to multiple network service providers. It will also offer its PAIX Internet exchange service in its Peachtree site

Roundup: The Planet, Dell, Juniper, Cisco

Here’s a roundup of news announcements from the data center and hosting industry:

• The Planet Reports Third Quarter Results. Hosting company The Planet discussed results for the third quarter of 2009 Tuesday. “Our performance this quarter provides cautious optimism about an emerging economic turn-around, with indicators moving in the right direction,” said Chairman and CEO Douglas J. Erwin said. “Our business experienced an upturn with new, more complex transactions and a healthier, more robust pipeline of opportunities than we’ve seen during the past three years.” Highlights of the quarter included a new partner plus channel program, hiring CAPSTAR commercial real estate to lease Dallas space, and joining the Microsoft BizSpark program.
• Juniper and Dell Collaborate.  Juniper Networks (JNPR) has had a flury of news lately, with an announcement Tuesday that it will collaborate with Dell to offer networking solutions under Dell’s PowerConnect brand.  Additionally the two companies plan to work on open, standards-based solutions for virtualized data centers and deliver technology solutions using Converged Enhanced Ethernet.  Dell plans to market, service and support Juniper’s high-performance networking solutions to its large enterprise, small and medium business customers and public organizations.  Juniper also announced that Australian Government superannuation administrator ComSuper has selected Juniper Networks to implement a completely new network infrastructure based on Juniper’s EX Series ethernet switches and Unified Access Control solution.  A third announcement Tuesday reported that Juniper’s executive and management team will ring the NYSE opening bell on Thursday, October 29th.

Equinix Expansion: Building, But Also Buying

Why is Equinix spending $698 million to acquire competitor Switch & Data? It was a “buy vs. build” decision writ large, with data center economics driving the math. Here’s what Equinix was able to buy for that $698 million (plus another $142 million to assume Switch & Data’s outstanding debt):

• 1.1 million square feet of data center space
• 979 paying customers and $171.5 million in annual revenue
• Additional data center capacity in Expansion space in three kley markets – Northern New Jersey, Silicon Valley and Dallas – where Equinix is running out of data center space.
• Overnight entry into 15 new markets, including five cities – Atlanta, Denver, Miami, Seattle, and Toronto – that were identified as key expansion markers by Equinix customers.

How much would it have cost Equinix to build new data centers in those five cities? Or to build more space in New Jersey, Silicon Valley and Dallas? Equinix clearly determined that it would be cheaper to buy Switch & Data, which shares its carrier-neutral colocation model and focus on interconnections.

“While new data center builds can take more than two years in planning and construction, the acquisition of Switch and Data provides an immediate entry into several key U.S. markets where Equinix does not currently have a presence,” Equinix said in a customer FAQ. “In addition, existing Switch and Data assets in markets where Equinix currently operates provide opportunities for expansion and creating additional capacity.”

Equinix Buys Switch & Data for $689 Million

In a blockbuster deal for the U.S. colocation sector, Equinix (EQIX) has agreed to acquire Switch & Data Facilities (SDXC) for $689 million in cash and stock, the companies said today. The deal is priced at $19.06 a share, representing a 32 percent premium to Switch and Data’s closing price of $14.40.

The deal 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, including Atlanta, Denver, Miami, Seattle and Toronto.

“As we have moved to a global service delivery platform with the integration of our European and Asia-Pacific operations, we have seen increasing customer demand in existing and new markets to provide solutions to support lower latency application requirements into new markets and additional key Internet markets,” Equinix said in an FAQ about the deal.

Deal Adds 1 Million SF of Space
Equinix will integrate Switch and Data’s data center business and operations, including the company’s 34 data centers in 22 markets in the U.S. and Canada. The acquisition will add more than 1 million gross square feet of data center capacity, bringing Equinix’s total global footprint to more than 6 million square feet across  79 data centers in 34 markets in North America, Europe and Asia-Pacific.

“The strategic acquisition of Switch and Data by Equinix further strengthens Equinix’s position as the most comprehensive global data center services provider across North America, Asia-Pacific and Europe,” said Steve Smith, president and CEO of Equinix. “Our complementary business models, coupled with Switch and Data’s broad North American market coverage, provide a platform for strong growth as well as an opportunity to accommodate our customers’ demands for additional services.”