Equinix is the most likely buyer of a 14-data center portfolio Verizon Communications has been looking to offload since at least January, according to a note by Cowen and Company analysts issued Tuesday, in which they said a transaction is likely imminent.
The portfolio consist primarily of data centers Verizon gained when it acquired Terremark in 2011, and the analysts estimate that Equinix may pay about $3.5 billion in the transaction, which would be neutral for Verizon and positive for Equinix, given high quality of the Terremark facilities and their locations, which would further increase Equinix’s already enormous global scale.
Verizon is one of several big telcos who expanded their data center footprint several years ago in hopes of capturing share of the growing cloud and data center services market but eventually found it difficult to compete with giants that have specialized in those services, companies like Amazon, Microsoft, Equinix, and Digital Realty Trust. Other examples are CenturyLink, which has been shopping a data center portfolio the bulk of which it took over in 2011 when it acquired Savvis, and AT&T, which reportedly has been trying to divest about $2 billion worth of data center assets.
Of the 14 data centers Cowen & Co. believes may be in play, the 750,000-square foot NAP of the Americas in Miami is the crown jewel. Colocating about 160 carriers, it is the primary interconnection hub for networks that carry traffic between the US and Latin America. The analysts estimate that this facility alone is responsible for about $100 million of the $250 million to $275 million in revenue they believe the portfolio generates for Verizon.
Another important site in the portfolio is NAP of the Capital Region campus in Culpeper, Virginia, right outside of Washington, DC. The nearly 1 million-square foot campus has reportedly enjoyed a lot of success with major private-sector enterprise clients.
Read more: Who May Buy Verizon's Data Centers?
In addition to the Miami and Culpeper sites, the portfolio includes three locations in North America, five in Europe and Middle East, two in Asia Pacific, and two in Latin America. Cowen & Co. highlighted the LatAm facilities (São Paulo and Bogota) in its report because they would be complementary to the ALOG data centers in Brazil Equinix acquired in 2014.
Here’s a more detailed list of the locations:
- Culpeper, Virginia
- Herndon, Virginia
- Miami, Florida
- Richardson, Texas
- Santa Clara, California
- Bogota, Colombia
- São Paulo, Brazil
- Amsterdam, The Netherlands
- Brussels, Belgium
- Frankfurt, Germany
- Istanbul, Turkey
- Madrid, Spain
- Hong Kong
If Cowen & Co. analysts end up being right, and Equinix and Verizon reach a deal, it will bring up at least two big questions.
One is whether Equnix would still consider a potential acquisition of some CenturyLink data center assets. The company’s executives have implied they were considering both Verizon and CenturyLink portfolios.
Another question is whether Equinix would be required to divest some of its properties for the deal to be approved by antitrust regulators. It was compelled to sell eight European data centers earlier this year in order for its TelecityGroup transaction, which made it the biggest data center provider in Europe, to get a regulatory green light.
Equinix and Verizon spokespeople did not respond to requests for comment in time for publication.