California-based Equinix said Friday it had agreed to acquire smaller U.K. rival TelecityGroup for £2.35 billion ($3.6 billion), in a move that would create Europe’s largest data center operator.
The proposed deal terminates an earlier merger agreement between Telecity and another suitor, Interxion Holding, Equinix said.
“The addition of TelecityGroup’s businesses will considerably strengthen Equinix’s offering to customers in Europe and beyond, reinforcing us as a global leader in global interconnection and data centres, as well as bringing the benefits of greater cloud and network density to our customers,” Equinix president and chief executive Stephen Smith said in a news release.
“The transaction will allow Equinix to benefit from increased scale and extend the global reach of our platform,” he added.
Telecity Executive Chairman John Hughes said that, after carefully weighing the firm’s options, “the board believes this is a compelling offer and an excellent outcome for shareholders, employees and customers.”
The Wall Street Journal said the deal underscores the data center industry’s consolidation amid “swelling demand” for data and digital services.
“The deal creates Europe’s largest data center operator and comes amid rising demand for data centers,” the WSJ wrote. “Driving the demand is the growing use of data on mobile phones and of so-called cloud services.”
The newspaper cited Cisco data showing that global Internet traffic will triple over the next five years, and Gartner research that cloud-computing spending will nearly double to $285.7 billion by 2018.
Under the terms of Equinix’s deal for Telecity, each Telecity Group shareholder would be entitled to receive 572.5 pence ($8.73) in cash and 0.0327 “New Equinix” shares for each Telecity share. Following completion of the deal, Telecity shareholders would hold roughly 10.1% of the combined company.
Upon completion, expected in the first half of 2016, Hughes would join Equinix’s board.