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Windstream Announces Sale of its Data Center Business

On Monday, October 19th, 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.