Digital Realty buys eight datacenters from Equinix to expand European presence

Contact: Mark Fontecchio

Digital Realty Trust pays Equinix $874m for eight European datacenters that the target needs to unload as a condition of its antitrust clearance from the European Commission for its $3.6bn purchase of TelecityGroup last year (seven of the eight properties in today’s deal are Telecity facilities). Digital Realty, for its part, obtains an instant presence in central London along with a European retail colocation footprint to complement its $1.9bn Telx Group buy in the US last year.

With the move, Equinix sheds about 20% of the facilities and operational square footage that it picked up when it agreed to acquire TelecityGroup. Digital Realty is paying 13x projected 2016 EBITDA, suggesting that Equinix was able to fetch a decent price despite the urgency behind the sale.

Most facilities divested by Equinix are older and have a stable base of clients that include IT service providers as well as financial services, digital media and content companies. Digital Realty has also granted Equinix a future option to purchase two of its datacenters for $215m. Located outside of Paris, the two facilities total about 140,000 operational square feet, and Equinix already operates there under a leasehold agreement.

Today’s deal also creates challenges for Interxion, a multi-tenant datacenter vendor that was set to be purchased by Telecity before Equinix swooped in and bought the would-be acquirer. Digital Realty was high on the list of potential Interxion suitors, but has now shown that it has other options for spreading its business into Europe.

Greenhill & Co advised Digital Realty on today’s transaction, which is expected to close in Q3.

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