It's been quite a week for data center industry consolidation in the U.S. Two companies, CyrusOne and CoreSite, announced deals valued at $15 billion and $10 billion, respectively. It is unusual to see two companies in the same industry announce such large acquisitions on the same day, but that's what happened on Monday.
Let's start with the bigger of the two deals. KKR, a well-known private equity firm, and Global Infrastructure Partners, a company that invests in infrastructure companies like data centers, both saw fit to pay CyrusOne a 25% premium on its closing stock price of $72.57 per share back on September 27 under the terms of the deal.
The deal has already been approved by the CyrusOne board and, pending approval of regulators, is expected to close sometime in the second quarter of next year.
Synergy Research Group, which tracks cloud and data center data, reports that this is the largest data center company deal to date, easily eclipsing Blackstone’s acquisition of QTS for $10 billion earlier this year.
Meanwhile, CoreSite matched the largest deal when it announced it was being purchased by American Tower, a real estate investment trust (REIT), for $10 billion. It boasts 25 data centers, 21 cloud on-ramps and over 32,000 interconnections in eight major U.S. markets, generating $655 million in annual revenue, according to the company.
These companies may not be household names, but Synergy reports that they are the third and fourth largest U.S. data center operations, measured by colocation (the number of firms using their services) and revenue. Both companies have a strong presence in the U.S. market. John Dinsdale, principal analyst at Synergy, says continued growth at these operations is driving the need for increased investment.
"The level of data center investment required is too much for even the biggest data center operators, causing an influx of new money from external investors," Dinsdale said in a statement. "In quick succession, ownership of four of the top six U.S. data center operators has changed hands, while the two biggest names in the industry – Equinix and Digital Realty – are increasingly turning to joint ventures to help fund their growth."
Interestingly, investors do not seem enthralled by these deals in spite of the seemingly gaudy price tags, with both stocks down today.