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UK data center provider Telecity Group receives takeover bid from US rival Equinix

08 May 2015

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The UK data center provider Telecity Group said yesterday that it was reviewing a cash-and-stock takeover bid from its much bigger US rival Equinix.

The takeover approach could put jeopardise an all-share deal announced in February between Telecity and its European rival Interxion Holding.

The latest offer would see Telecity receive the equivalent of £11.45 pounds, per share in a combination of cash and shares. The offer would represent a 27- per cent premium to Telecity's closing price on Wednesday, and valued Telecity at £2.3 billion.

Shares of Telecity were up roughly 19 per cent to £10.66 in morning trading in London on yesterday.

The company's earlier agreement with Interxion,  prohibited, Telecity from actively seeking alternative proposals, however, it was allowed to enter takeover discussions with third parties in limited circumstances.

''Having carefully considered the Equinix proposal in the light of this exception, the board of Telecity Group has determined that it is required by virtue of its fiduciary duties to enter into discussions with Equinix and has decided to permit Equinix to undertake a short period of due diligence,'' Telecity said in a news release on Thursday.

According to Telecity there was ''no certainty'' that a firm offer would be made by Equinix, one of the world's biggest providers of data centers.

Bloomberg quoted Milan Radia, an analyst for Jefferies in London as saying on phone that he suspected the shareholders to favour the terms of the Equinix deal. Interxion and Telecity managers probably could not make the terms of their merger any more compelling, and regulatory hurdles for both alternative deals were similar, he added.

A deal with Telecity would create ''a more compelling combination than the proposed merger with Interxion and would deliver greater value for Telecity shareholders,'' Equinix said.

Interest for data centers was on rise as consumers and companies looked to store information remotely so it could be accessed from mobile phones, tablets and desktop computers. Equinix's operations span US, Canada, Brazil, several countries in Europe and Asia, the United Arab Emirates and Australia. Telecity's operations are spread from Dublin to Sofia and Istanbul to Stockholm.

Interxion, which operates mainly across central and northwestern Europe, said in a statement that it continued to believe that a merger with Telecity ''is a strategically compelling combination that delivers meaningful value'' to shareholders of both companies.

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