(Rewrites, adds detail.)
By Simon Zekaria
LONDON--U.S data center operator Equinix Inc. (EQIX) Thursday
joined the multi-billion dollar bidding war for Telecity Group PLC
(TCY.LN) after making a cash and share offer for the U.K.-based
peer, marking the industry's latest consolidation scramble in
Europe to meet demand for digital services.
Equinix has offered 1,145 pence per share, with 54% of the offer
payable in cash and approximately 46% in Equinix stock, Telecity
said in a statement. "At this stage, there can be no certainty that
any offer will ultimately be made for Telecity Group, or as to the
terms on which any offer would be made," it added.
Redwood, Calif.-based Equinix, which has Google Inc. (GOOGL) and
Microsoft Corp. (MSFT) as clients, said it has until June 4 to make
a firm offer for Telecity.
In February, U.K.-based Telecity said it would merge with
Netherlands-based Interxion Holding NV (INXN) to form an operator
with a combined value of $4.5 billion. In an all-share agreement,
Interxion shareholders would receive 2.3386 new Telecity shares for
each Interxion share, representing a 15% premium to Interxion's
closing share price of $26.47 on Feb. 9.
In a statement Thursday, Interxion said it remains committed to
the merger with Telecity on the terms as agreed, and both parties
continue to work to progress the transaction.
At 0819, Telecity shares jumped 20% to 1,077 pence, valuing the
company at 1.83 billion pounds ($2.78 billion).
"We do not anticipate material regulatory obstacles to an
Equinix [and] Telecity combination," said Citi analyst Simon
Weeden. "We expect Telecity shareholders to be comfortable taking
stock as part of a proposed consideration given the unique global
positioning of the resulting company," added Mr. Weeden.
Telecity operates in major European cities such as London, Paris
and Frankfurt. New York-listed Interxion has 39 data centers in 11
European countries. Equinix, which has more than 100 data centers
world-wide, has a market value of over $14 billion.
Equinix said its deal with Telecity would create a "more
compelling" combination than the proposed merger with
Interxion.
The bidding battle comes amid rising demand for data
centers--vast warehouses of computer and telecom equipment that
power the Internet--as consumers use more data on their mobile
phones and so-called cloud services--a catch all term for files
accessed remotely over the Internet but hosted on outside
computers.
As well as spending billions of dollars on their own data farms,
companies are increasingly outsourcing data management and
information technology handling to so-called co-location operators
such as Telecity, Interxion and Equinix, where space is rented by
rack, cage or room.
Global Internet traffic will triple over the next five years,
according to networking-hardware specialist Cisco Systems Inc.,
with mobile data flow rising 11-fold between 2013 and 2018.
Cloud-computing spending will nearly double to $285.7 billion in
2018 from 2014, research firm Gartner added
Separately Thursday, Telecity said fiscal first-quarter revenue
fell 0.1% year-on-year. Excluding currency effects and one-off
items, revenue rose 9.6%, which is ahead of company expectations,
it said.
Write to Simon Zekaria at simon.zekaria@wsj.com
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