On Tuesday, October 20^th, Cologix announced that it had agreed to acquire Net Access, LLC.  Cologix is a network neutral interconnection and data center company.  Net Access is a colocation and workspace recovery provider. 

Transaction Facts

• Net Access has over 200,000 gross sq. ft. amongst its 3 enterprise-grade Northern New Jersey facilities.
• Net Access has over 700 customers. 
• Net Access data centers are interconnected to a dark fiber network that connects them to carrier hotels in the Greater NYC region.
• Cologix has approximately 21 data centers and over 900 customers.

Strategic Considerations

• Grant van Rooyen, President and CEO of Cologix, commented on the transaction saying “We have been very impressed with the team and operations Net Access has built and look forward to harnessing the strength of the combined company.”
• Transaction gives Cologix access to Net Access’s customers which range from small businesses to Fortune 1000 companies. 
• Acquisition gives Cologix further entry into the growing New Jersey market.

On Monday, October 19^th, Windstream (NASDAQ: WIN) announced that it had reached an agreement to sell its data center business to TierPoint for $575.0 million in an all-cash transaction.  Windstream was among the first of the telcos to move into the data center space, acquiring Hosted Solutions for $320m in 2010.

Transaction Facts

• TierPoint is a national, leading provider of cloud, colocation and managed services
• Combined operations will serve 4,500+ customers with approximately 500,000 sq. ft. of data center capacity in 19 U.S. markets.
• Transaction has already been approved by both boards and is expected to close within the next 2-4 months.

Strategic Considerations

Transaction will result in Windstream establishing a continuous, reciprocal, strategic relationship with TierPoint as both companies will sell their products and services to one another’s prospective customers as referral partners.

• Along with the spinoff of its network assets into a REIT earlier in 2015, the data center sale is consistent with Windstream’s continuing effort to delever its balance sheet.
• Jerry Kent, Chairman and CEO of TierPoint, commented on the transaction and referral partner agreements saying “This is a great strategic fit for TierPoint and our customers.”

JSICA’s Take

• Transaction has an EV/REV multiple of 4.3x and an EV/OIBDA multiple of 12.9x.
• Transaction will allow TierPoint to continue to grow its data center business, which already consists of 13 data centers across 8 states.
• Windstream will continue to generate revenue from data center sales through the referral partner agreement with TierPoint, maintaining a level of exposure to the high growth segment without owning and operating the physical data centers.

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.

QTS Realty Trust, Inc. (NYSE: QTS) announced on Wednesday, June 17^th that it had closed its acquisition of Carpathia Hosting, Inc. for approximately $326.0 million.  The deal was originally announced on Wednesday, May 6^th.  The acquisition significantly increases QTS’ data center footprint and grants access into new domestic and international markets. 

Valuation Analysis and Deal Metrics

   
Transaction Facts

• QTS Realty is an industry-leading provider of hybrid cloud services and managed hosting. 
• Carpathia Hosting is an industry-leading provider of colocation, cloud and managed services. 
• Acquisition will be financed through approximately $290.0 million in cash and $36.0 million in capital leases that are expected to be funded on a leverage neutral basis. 
• Carpathia Hosting has approximately 8 domestic and 5 international data centers. 
• Carpathia’s portfolio of data centers equals approximately 66,700 square feet in total. 

Strategic Considerations

• QTS Realty gains approximately 230 commercial and federal customers as a result of the acquisition.
• Increases QTS’ average MRR per customer from $15,000 to $27,000.
• $2.0 million in expected synergies for QTS are expected in 2016 as a result of the transaction.
• Carpathia’s footprint in North America is complementary to support QTS’ Federal Government business.
• Transaction provides QTS with entry into markets such as Toronto, Amsterdam, London, Hong Kong, and Sydney. 

JSICA’s Take

• Acquisition of Carpathia Hosting will allow QTS Realty to add an international presence, as well as diversify its footprint across North America.
• QTS Realty will be able to differentiate itself in industry channels such as Healthcare and Government, which are highly regulated.

On Wednesday, June 10^th, H5 Data Centers announced the acquisition of Ashburn Data Center.  The Ashburn Data Center is a wholesale datacenter located at 21800 Beaumeade Drive in Ashburn, Virginia.  

Transaction Facts

• H5 Data Centers is a national colocation and wholesale data center provider.
• Ashburn Data Center is approximately 70,000 sq. feet.
• Location is within the Ashburn data center cluster
• Ashburn Data Center has at least 8.5 megavolt amperes (MVA) of power capacity. 

Strategic Considerations

• Data center is expandable to 100,000 sq. feet.
• Pre-Leasing to international carriers, colocation and cloud service providers, and large enterprises has already begun.
• Data center will be marketed as a powered shell or build-to-suit data center.
• Josh Simms, CEO of H5 Data Centers, felt as though the location, along with the proximity to fiber providers, coupled with a fully customizable data center will help market the offering.

JSICA’s Take

• Ashburn acquisition gives H5 the opportunity to serve either domestic or international wholesale customers that are looking for an East Coast data center. 
• Acquisition adds to H5’s growing number of data centers, which now consists of approximately seven data centers in markets such as Atlanta, Charlotte, San Jose, San Luis Obispo, as well as Seattle.