Verizon announced this Tuesday the selling of data centers to Equinix by an amount of $3.6 billion. The official transaction is set to happen next year.
The deal is going to involve the selling of Verizon assets in Latin America and North America. The rumors of the sale began this year when Verizon started to focus on another business areas. Now, Verizon can enhance the connectivity and wireless business, with getting funds to the big purchase of Yahoo, set to be made in early 2017.
The trade will give Equinix over 29 data center buildings and will allow the company to expand in 15 global markets. This expansion includes the presence in metropolitan markets present in Atlanta, Denver, Miami, New York, Sao Paulo, and Seattle.
The Miami data center, formerly owned by Verizon, represents a gate for the Latin American market, which is a primary objective for Equinix. Also, the deal includes the data centers from Bogota, Colombia, and Sao Paulo, Brazil.
Adding up the current assets of Equinix, the company will now own 175 data center buildings in over 43 international markets. All the Verizon data center employees, about 250 people, will work for Equinix when the deal is concrete, along with the acquisition of over 900 new customers.
“We’ve been looking at these assets for a long time. They check a number of strategic boxes for us,” Equinix Americas President Karl Strohmeyer said in a conversation with experts this Tuesday.
Verizon’s objectives
The huge selling of these 29 data centers buildings, across 24 data center sites, represents a retreat from a business that was a former top priority for the company. Just five years ago, Verizon made the acquisition of Terremark Worldwide Inc. for $1.3 billion, in order to expand the data center business. However, the company’s focus changed and it started to be oriented towards mobile video and advertising.
Verizon understood that telecommunications have another direction, and it has used other tools to accomplish the new goal. With the exploit of go90, their live-streaming video platform, the acquisition of AOL’s Web properties and the upcoming purchase of Yahoo! Inc, Verizon is clearly challenging big companies like Google Inc. and Facebook Inc. in the mobile video and advertising area.
On this subject, AOL CEO, Tim Armstrong, has shown his optimism regarding the Yahoo purchase despite the security breach reported this year. AOL is owned by Verizon since they bought the mass media company on $4.4 billion last year.
The telecommunications company has sold an important amount of noncore assets, such as residential phone lines, in order to focus on their primary objectives: wireless media and digital media.
Reuters reported that earlier this year, Verizon put the data centers for sale, after facing competition from companies like T-Mobile and Sprint, that were offering huge appealing discounts in cellphone data plans.
The company is looking forward to satisfying the common need of customers, which is cheaper ways for data managing without losing the effectiveness.
Verizon also announced that the data centers located in Europe, Canada, and Asia-Pacific, would not be affected by the deal. Managed hosting and cloud system would not get repercussions as well.
Right now, Verizon is the number one American wireless carrier. After the trade announcement, Verizon shares grew by 1.2 percent – $50.82 per share.
Verizon was advised by Citigroup Inc. and Guggenheim Partners, with Jones Day providing legal assistance.
About Equinix movements
American Equinix is a data center operator that provides space, power, and cooling. It also offers internet exchanges that allow international interconnection. Right now this company is the number one provider of IBX data centers worldwide.
In the official announcement, the company stated that this deal will reinforce their international platform and enhance the current interconnection system in the U.S. and Latin America. Also, they said in the announcement that this purchase will accelerate the company´s involvement in several strategic market sectors like government relations and energy.
On this matter, one of the data centers located in Virginia, and that will form part of Equinix assets, is one of the main providers for national public agencies near Washington D.C., and will speed the process of incorporation of Equinix in the sector.
The company´s CEO, Steve Smith, said this Tuesday that he is confident on this trade being positive to the enterprise and their shareholders.
“The new assets will bring hundreds of new customers to Platform Equinix while establishing a presence in new markets and expanding our footprint in existing key metros,” he said this Tuesday after the purchase announcement.
The Equinix shares went up by 3.2 percent in early trading, climbing up to $342.81 per share. However, the company hasn’t been able to recover from the 13 percent fall since the stock got to $391 on earlier July.
Equinix advisement came from Evercore Partners Inc., JPMorgan Chase & Co., and law firm Davis Polk & Wardwell LLP.
Source: Bloomberg