Equinix said its acquisition of TelecityGroup would be better for shareholders than a Telecity-Interxion merger

Equinix confirmed it is currently in discussions which could lead to its acquisition of UK datacentre specialist TelecityGroup, a move it said would significantly enhance its standing in the region.

The American datacentre incumbent last week offered TelecityGroup £2.3bn in a cash-and-shares deal that would see Equinix acquire its assets, a move that would likely jeopardize a recent Telecity merger proposal with Interxion.

Telecity has a market cap of about £1.4bn with datacentres dotted around Northern Europe; Interxion is valued at £1.27bn and has close to 40 datacentres all over the Europe.

“The Board of Equinix believes that this opportunity represents attractive shareholder value creation potential for Equinix, complementing and extending Equinix’s geographic footprint in Europe and enabling increased network and cloud density to better serve customers,” the company said in a statement.

“In the United Kingdom, the acquisition of TelecityGroup would add capacity in Central London and Docklands that would complement the focus of Equinix’s current operations in Slough. Additionally, the acquisition would add capacity in several of Equinix’s current locations throughout Europe, and extend Equinix’s footprint into new locations with identified cloud and interconnection needs including Dublin, Helsinki, Istanbul, Milan, Stockholm and Warsaw.”

“In addition, the Board of Equinix believes that a potential transaction with TelecityGroup would create a more compelling combination than the proposed merger with Interxion Holding N.V. and would deliver greater value for TelecityGroup shareholders,” the company added.

Equinix, which has a month to firm up its final offer to Telecity, has well over 100 datacentres in about 15 countries, and most of those are concentrated in major metropolitan areas.

Equinix has made a £2.3bn bid for Telecity Group

Telecity Group said it has been approached by Equinix about a possible acquisition that could see it shell out close to £2.3bn in a cash-and-shares deal for the UK datacentre incumbent.

The Board of TelecityGroup today said it has received an approach from Equinix regarding a possible offer for TelecityGroup at £11.45 pence per share, with the consideration payable in a mixture of cash and Equinix stock. About 54 per cent of the consideration would be payable in cash and approximately 46 per cent in Equinix stock, which all told would cost nearly £2.3bn.

“Having carefully considered the Equinix proposal in the light of this exception, the Board of Telecity Group has determined that it is required by virtue of its fiduciary duties to enter into discussions with Equinix and has decided to permit Equinix to undertake a short period of due diligence,” the company said in a statement.

“At this stage, there can be no certainty that any offer will ultimately be made for Telecity Group, or as to the terms on which any offer would be made.”

Equinix has until early June to firm up its offer.

Selling itself at a time when Telecity is in a relatively strong position would be somewhat surprising, particularly given Telecity’s recent bid for Interxion. In February this year Telecity carved out a £1.3bn merger with Interxion.

If a palatable offer were made the move would give Equinix a reasonable boost in Europe. Telecity has a market cap of about £1.4bn with datacentres dotted around Northern Europe. But any deal with Telecity would likely jeopardize the merger proposal with Interxion, which is valued at £1.27bn and has close to 40 datacentres all over the Europe.

As Telecity pointed out, that merger agreement “prohibits either Interxion or TelecityGroup from soliciting alternative proposals and from discussing alternative proposals except in limited circumstances.”