Telecity Group plc, a London-based European carrier-neutral datacentre and colocation centre provider and Amsterdam-based, New York-listed Interxion Holding NV, have agreed on a non-binding $2.2 billion all-share acquisition deal, as the British company taps into growing demand for “cloud” technology.
In early trading on Wednesday, shares in Telecity rose by more than 16%, reaching a 19-month high. The two companies operate some of the massive computer centers which process Internet traffic.
Telecity said the complementary strengths of the merger will better fulfill the expanding product, service and geographic needs of its customers.
Telecity is acquiring Interxion as it attempts to tap into the “cloud” market.
The new entity will have a combined value of $4.5 billion. Telecity shareholders will own about 55%, and Interxion stockholders approximately 45% of the merged company.
John Hughes will continue as Executive Chairman of Telecity, and will be Chairman of the combined group when the transaction is completed. Current Chief Executive of Interxion, David Ruberg, will continue as CEO for 12 months after completion of the transaction.
Regarding the merger, Mr. Hughes said:
“I am delighted to announce that the boards of TelecityGroup and InterXion have reached a non-binding agreement on an all share merger. We are confident that this combination represents an extremely compelling combination for all stakeholders of both companies.”
Demand for premium centers, which Telecity runs, is being driven by “cloud” technology, in which data and processing for devices like smartphones, tablets and PCs is carried out on millions of remote servers.
In the deal, Interxion shareholders will receive 2.3386 Telecity shares per Interxion share, which is a 15% premium on Interxion’s $26.47 share price at the close on February 9th, 2015.
Telecity, with a market capitalization of ₤1.72 billion ($2.63 billion), operates in Europe’s major cities including Franfurt, London and Paris, while Interxion, valued at $1.94 billion, operates thirty-nine data centres in 11 European nations.
Telecity revenue and final dividend up
Telecity also published its full-year results today, which showed revenue was 7.1% up to ₤348.7 million ($532 million). Its final dividend of 9 pence per share brings the total to 13.5 pence.
The company said the merged entity will have a primary listing in London, with perhaps a New York listing for its existing ADRs. ADRs (American Depositary Receipts) are stocks of foreign companies that trade in US markets, they are exchanged in U.S. dollars, through a U.S. broker-dealer.