Contact: Scott Denne Kelly Morgan
NTT Communications jumps into the US hosting market with two of the biggest purchases in its history, paying $525m for networking services company Virtela Technology Services and $350m for an 80% stake in RagingWire, a Sacramento, California-based datacenter vendor. NTT Com’s strategy is all about providing infrastructure and services, and these deals feed both aspects.
The Japanese telecom giant first revved up its US dealmaking with the $8m pickup of a former Harley-Davidson datacenter just over a year ago; it followed that up with the acquisition in June of Solutionary, a managed security services provider generating about $50m in annual sales. Virtela gives NTT Com an expanded networking services portfolio, both in the US and abroad, complementing its organic efforts to offer SDN capabilities.
NTT Com is paying an exceptionally high multiple to buy RagingWire, filling a notable gap in its infrastructure portfolio. Not only is the $350m it’s handing over the second-highest amount (behind Virtela) that NTT Com has ever disclosed paying for a company, at 5.1x RagingWire’s annual sales it’s the highest multiple for any US hosting firm since Verizon’s takeout of Terremark two and a half years ago. (The median value for such deals over the past 24 months is 2.1x.) DH Capital advised RagingWire on its sale.
Prior to this transaction, NTT Com had four datacenters in the US. Most were older, nearly full and certainly not as well-known or high-quality as RagingWire. RagingWire comes out of the deal with strong financial backing, a deeper portfolio of managed services and a large roster of potential customers, all while retaining an element of independence as it will operate its own brand under the guidance of its existing management team and founders.
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