The Data Center Space get hotter than ever
It appears that this may be a great time to be in the Data Center space if you are looking to cash in on your investments. This week both CoreSite Realty and CyrusOne have been involved in huge buyout deals, CoreSite for $10.1 Billion and CyrusOne for about $15 Billion in a go private deal.
First, the CoreSite deal. The full cash offer is a testament to the power and prestige of American Tower. While the deal was at a significant premium to the previous valuation of CoreSite, this is a seemingly strategic purchase for AMT to keep its vision on track. It’s a big win for CoreSite, which got a hefty price for the company ($170 per share). While this is a huge deal even for American Tower it is consistent with their history of doing big deals. AMT has never been afraid to pull the trigger on large scale acquisitions, CoreSite fulfills the vision for the company add pieces that give the firm and end to end play. It has consistently increase ebitda, cash flow and FFO (funds from operations).
This deal has all the earmarks of how AMT sees its business with a strong view towards expanding its EDGE strategy. Today CoreSite owns 25 data centers, 21 cloud on ramps, and over 32,000 interconnections across eight major markets in the US. It owns 2.8 million rentable sq ft of space. About 41% of its revenue comes from end user enterprise customers while 35% comes from cloud customers. About 24% of its revenue comes from network relationships.
Aside from the synergistic aspect of this deal, it’s a great business and AMT has recognized that fact. While there are a number of skeptics on Wall Street about how much AMT paid for CoreSite and exactly how the integration will go this seems like a great purchase and a solid, long term opportunity. As AMT tries to exploit the EDGE opportunity by bringing data processing closer and closer to the collection points, the physical footprint of these huge data center operators will provide significant help to achieve this. This helps to reduce the needs for greater bandwidth and benefits low latency that is needed when dealing with high volumes of data. It becomes more necessary when you introduce the concept of small cells and in building wireless to the mix for increased data processing speeds.
CyrusOne Goes Private
In another data center deal, Cyrus One announced that it was teaming with Global Infrastructure Partners (GIP) and KKR in a go private transaction that was valued at $15 Billion. This reflects on about a 25% premium to its recent share price and includes the assumption of debt. There appears to be no synergies related to this deal- just a great opportunity for GIP and KKR to jump into this space with a well-run, growing company.
CyrusOne, a REIT based in Dallas, builds, owns and operates data centers around the US, Europe and South America. Currently the company has about 50 locations and over 1000 customers with the advent of cloud computing and the explosion of data from all sources. Its partners in this deal are flush with cash and willing to spend it on prized assets like CyrusOne. KKR, which has over $450 Billion in assets and GIP which has nearly $80 Billion in assets, are teaming up to do this deal. They will pay $90.50 per share for the stock which is expected to close in Q2 of 2022.
Are there more deals to come in the data center space? Seems like a good bet.