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ABRY Acquires Q9 Networks for $361 Million

Private equity firm ABRY Partners has agreed to buy Canadian data center specialist Q9 Networks (TSX:Q) for $361 million.

Private equity firm ABRY Partners has agreed to buy Canadian data center specialist Q9 Networks for $361 million, continuing its string of acquisitions in the sector, the companies said Monday. ABRY Partners will pay $17.05 a share for Q9, a 38 percent premium to its closing share price Monday on the Toronto Stock Exchange.

ABRY Partners acquired Houston managed hosting specialist CyrusOne last year, and bought Hosted Solutions for $140 million in April.

"We are strong believers in the Canadian data center infrastructure market and are excited to be participating in it through our acquisition of Q9," said C.J. Brucato, Partner at ABRY Partners. "Q9, with its talented management team, has achieved a leading market position and a diversified blue chip customer base. We look forward to helping Q9 accelerate their growth and extend their leadership position."

Q9 Networks has data centers in Toronto, Calgary and Brampton, Ontario with a total capacity of 7,930 cabinet equivalents, with 4,864 cabinets currently housing customers. The company recently completed an expansion of its Brampton facility that added room for 1,200 cabinets, and recently announced a major expansion in Calgary that will eventually add as many as 10,000 cabinets.

Q9 had revenue of $16.0 million in the second quarter, an improvement of 19 percent from the same quarter in 2007 and a 1 percent increase over the previous quarter. Colocation revenue for the second quarter 2008 was $8.1 million, managed services revenue was $5.2 million and managed bandwidth revenue was $2.3 million. Set-up and other fees were $0.4 million.

"ABRY is one of the most experienced private equity firms in the media, communications, and information industry," said Osama Arafat, CEO of Q9. "We believe they are the right partner to continue our aggressive growth plans while providing outstanding service to our valued customers. We are very proud of what the Q9 team has achieved to date and we look forward to leading them through our next phase of growth."

Q9 expects the deal to close in the fourth calendar quarter of 2008. The company has a "go shop" period in which it can consider competing offers, which expires on Oct. 3.

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