Digital Realty to Acquire Telx for Data Centers and Internet Exchanges

Digital Realty Trust agreed to acquire Telx, a national provider of data center colocation, interconnection and cloud enablement solutions, for $1.886 billion from private equity firms ABRY Partners and Berkshire Partners.

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.

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. Telx's flagship facilities include its NYC1 data center at 60 Hudson Street in Manhattan, which serves as a nerve center for international communications and offers access to physical connection points to the world’s telecommunications networks and Internet backbones. Telx occupies multiple floors at 60 Hudson with interconnectivity to more than 400 carriers, financial exchanges and application, media, content, and software-as-a-service providers with just a single connection. Telx operates other NYC data centers at 111 8th Ave. and 32 Avenue of the Americas (6th Ave).

As of March 31, 2015, Digital Realty's portfolio consisted of 130 properties, including 14 properties held as investments in unconsolidated joint ventures, comprised of approximately 22.1 million square feet, excluding approximately 1.2 million square feet of space under active development and 1.3 million square feet of space held for future development, located throughout North America, Europe, Asia and Australia.

"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 as New 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."

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.

http://www.telx.com
https://blog.digitalrealty.com/2015/07/power-of-connection-bill-stein-telx-acquisition/