Cloud service provider TierPoint has entered into a definitive agreement with comms vendor Windstream to buy its data centre business for a pure cash transaction of $575 million.

As part of the deal the two will enter a reciprocal partnership, selling each other’s products and services to their prospective customers through referrals. This structure will allow Windstream to focus on its telecom offerings while continuing to offer traditional data centre services to enterprise customers.

The boards of both companies have approved the transaction, which is expected to close within the next two to four months, subject to customary conditions and approvals.

Cloud service provider TierPoint will inherit invaluable data centre support expertise according to CEO Jerry Kent. “This is a great strategic fit for TierPoint and our customers,” said Kent, “Windstream Hosted Solutions and its employees have a reputation for providing excellent customer service and enterprise-class solutions. We value these team members as a key asset in the acquisition and their expertise adds to our strength.”

The long-term strategic partnership with Windstream allows both the comms vendor and the service provider to concentrate on their own strengths and complement each other’s contributions and data centre services are still an integral component of enterprise service explained Windstream’s CEO Tony Thomas. “We expect the divested data centre business to continue its significant growth under the leadership of TierPoint, and we look forward to partnering closely with them to provide advanced data centre services to our enterprise customers,” said Thomas.

The deal has a certain logic, but it’s also illogical in some aspects, said Quocirca analyst Clive Longbottom. “A smaller company trying to compete on non-core data centre activities will always be at a disadvantage, so selling to a data centre expert gives much greater capabilities and flexibility, so at this level, it makes sense,” said Longbottom.

However, he questioned the rational of specialisation followed by duplication of effort. “It leaves Windstream to focus on its comms business on one hand, except it says it won’t, as it will resell data centre services through Tierpoint. And Tierpoint will sell comms services through Windstream. Two companies, selling the same offering, but with overlapping and redundant back office costs, so driving the cost to the customer up,” said Longbottom, “it would make far more sense for the deal to be a merger with two divisions, to my mind.”