Digital Realty Trust Inc. has agreed to buy Telx in a deal valued at $1.886 billion. The sellers are ABRY Partners and Berkshire Partners. New York-based Telx provides data center colocation, interconnection and cloud enablement solutions. BofA Merrill Lynch and Morgan Stanley advised Digital Realty. Barclays and DH Capital advised the sellers and Telx.
SAN FRANCISCO, July 14, 2015 /PRNewswire/ — Digital Realty Trust, Inc. (NYSE: DLR), a leading global provider of data center and colocation solutions, and Telx, a national provider of data center colocation, interconnection and cloud enablement solutions, announced today they have entered into a definitive agreement under which Digital Realty will acquire Telx from private equity firms ABRY Partners and Berkshire Partners in a transaction valued at $1.886 billion.
The combination is expected to double Digital Realty’s footprint in the rapidly-growing colocation business, as well as provide Digital Realty customers access to a leading interconnection platform. Telx’s extensive interconnection ecosystem enables the exchange of information between communications service providers, enterprises, content providers and other entities with low latency and diverse connectivity across a global network and is expected to provide Digital Realty an opportunity for future growth. As of March 31, 2015, Telx managed 1.3 million square feet of data center space operating out of 20 facilities across the country, of which two are Telx-owned, 11 are leased from Digital Realty, one is partially sub-leased from Digital Realty and an unrelated third party, and six are leased from third parties.
“This transformative transaction is consistent with our strategy of sourcing strategic and complementary assets to strengthen and diversify Digital Realty’s data center portfolio and expand our product mix and presence in the attractive colocation and interconnection space,” said A. William Stein, Digital Realty’s Chief Executive Officer. “Telx’s well-established colocation and interconnection businesses provide access to two rapidly-growing segments with long-standing customer relationships in top-tier metropolitan areas such asNew York and Silicon Valley. The fact that more than half of Telx’s 20 facilities are run out of Digital Realty properties further highlights the strategic fit as well as the potential incremental revenue opportunities we expect to be able to pursue as one company on a global basis. This transaction advances our objective of ensuring that Digital Realty’s suite of products and services is able to best serve our customers’ current and future data center needs.”
“We are excited to join Digital Realty and become part of a much larger global data center services platform,” said Chris Downie, Chief Executive Officer of Telx. “We look forward to working with the Digital Realty team to extend a broader, enhanced data center solution to our collective customers. The combination of Telx’s colocation and interconnection capabilities with Digital Realty’s expansive wholesale platform provides greater flexibility and optionality for our customers and creates a global solutions provider covering wholesale customer applications and smaller performance-oriented deployments in select high-growth urban submarkets across the U.S. As we open this new chapter, I am proud of our team who, with the support of our partners, ABRY and Berkshire, have significantly increased Telx’s revenue and earnings since 2011 and have positioned the company for long-term growth.”
Closing Details and Financial Impact
In connection with the definitive agreement, Digital Realty received a commitment from a syndicate of lenders for a $1.850 billion unsecured term loan bridge facility, the proceeds of which will be available for use, if necessary, to fund a portion of the acquisition of Telx. Borrowings, if any, under the bridge facility will bear interest at a rate based, at the borrower’s option, on LIBOR or a Base Rate (as defined in the commitment papers), in each case plus an applicable margin based on Digital Realty ‘s credit rating, and the facility will mature 364 days after the closing date of the acquisition of Telx.
The transaction is expected to close later in the year and is subject to customary closing conditions. The transaction is expected to be accretive to 2016 financial metrics.
BofA Merrill Lynch and Morgan Stanley are serving as Digital Realty’s financial advisors and Latham & Watkins LLP is serving as Digital Realty’s legal counsel in connection with the pending acquisition. Barclays and DH Capital are serving as financial advisors and Kirkland & Ellis LLP is serving as legal counsel to ABRY Partners, Berkshire Partners and Telx in connection with the pending acquisition.
Additional details about the transaction will be provided on Digital Realty’s second quarter 2015 earnings call scheduled for Thursday, July 30, 2015.