JSI Capital Advisors - The Monitor

On Tuesday, July 14^th, Digital Realty Trust Inc. (NYSE: DLR) announced that it had reached an agreement to acquire Telx Holdings, Inc. from private equity firms ABRY Partners and Berkshire Partners for approximately $1.886 billion.

Valuation Analysis and Deal Metrics

Transaction Facts

Deal will immediately enhance Digital Realty’s data center footprint.
Telx managed approximately 1.3 million square feet of data center space across the United States, as of March 2015.
The deal will be funded partly through a public offering of 1.5 million shares priced at $68.00 per share.
Telx’s 1Q 2015 annualized operating results - revenues of $334 million, core EBITDA of $122 million and monthly recurring revenue of $114 million.
Transaction is expected to close by the end of 2015.

Strategic Considerations

Digital Realty’s colocation footprint is expected to double as a result of the transaction.
11 of the 20 data centers that Telx manages are leased from Digital Realty.
Telx’s colocation and interconnection capabilities should be a good fit combined with Digital Realty’s expansive wholesale platform.
Combination will allow Digital Realty to provide greater flexibility and options to its customers.

JSICA’s Take

Deal should allow Digital Realty to be able to provide a larger selection of colocation and offer interconnection services to a well-established customer base in major metro areas like New York and Silicon Valley.
Throughout the past year, Digital Realty has continuously been adding to its presence in the data center and cloud services market.