New York Stock Exchange-listed data centre operator Digital Realty has agreed to acquire a majority stake in Teraco, an African carrier-neutral co-location provider, for about $1.9 billion.
Teraco is owned by a consortium of investors and was valued at $3.5 billion in the transaction. Digital Realty will own about 55% of Teraco after the deal closes.
The remaining 45% will be held by a consortium of existing investors, including the company’s management, Berkshire Partners, Permira, van Rooyen Group, Columbia Capital, Stepstone Ventures and the Teraco Connect Trust.
These investors will have the right to sell their stake to Digital Realty between 3.5 years and 5.5 years after closing. Digital Realty will have the right to buy this stake between 5.5 years and 6.5 years after closing.
The transaction is expected to close in the first half of 2022.
This deal comes just weeks after another high-profile transaction where Equinix is buying Nigerian data centre firm MainOne for $320 million, and six months after Digital Realty’s India entry when it tied up with Canada’s Brookfield to set up data centres in the South Asian nation.
Teraco has seven facilities located in the key South African metros of Johannesburg, Cape Town and Durban. It serves over 600 customers, including more than 275 connectivity providers, over 25 cloud and content platforms and 300 enterprises. It hosts seven on-ramps to global cloud service providers in Johannesburg and Cape Town, and provides direct access to seven subsea cables in Durban on the east coast and Cape Town on the southwest coast.
Teraco’s platform contains 187 megawatts of total planned capacity, including seven in-service facilities totalling 75 megawatts and one development project totalling 19 megawatts currently under construction.
Digital Realty said the combination of Teraco’s leading position in South Africa with its own connectivity hubs in Nigeria on the west and Kenya on the east coast, along with strategic Mediterranean interconnection hubs in Marseille and Athens, will strengthen its pan-African position.
Digital Realty, which operates 280 data centres across 24 countries, expects the transaction to be about 1% dilutive this year and to breakeven next year.
Solomon Partners is acting as financial advisor and Latham & Watkins LLP and Bowmans are acting as legal advisors to Digital Realty.
Goldman Sachs is acting as financial advisor to Teraco. Weil, Gotshal & Manges LLP and ENSafrica are serving as legal advisors to Teraco.