Digital Realty Trust To Buy Telx In $1.89 Bln Deal; Begins Common Stock Offering

(RTTNews) - Digital Realty Trust, Inc. (DLR) has agreed to acquire Telx, a provider of data center colocation, interconnection and cloud enablement solutions, from private equity firms ABRY Partners and Berkshire Partners LLC in a deal valued at $1.886 billion, the companies said Tuesday. The deal marks further consolidation in the data-center sector.

San Francisco, California-based Digital Realty Trust is a real estate investment trust that acquires and develops technology-related real estate. The company expects the acquisition to double its footprint in the rapidly-growing colocation business as well as provide its customers access to a leading interconnection platform.

As of March 31, 2015, New York-based Telx managed 1.3 million square feet of data center space operating out of 20 facilities across the country. Of these facilities, two are Telx-owned, 11 are leased from Digital Realty, one is partially sub-leased from Digital Realty as well as an unrelated third party, and six are leased from third parties.

Digital Realty has received a commitment from a syndicate of lenders for an unsecured term loan bridge facility of $1.85 billion. The company noted that the proceeds will be available for use, if required, to fund a portion of the acquisition of Telx.

The transaction, subject to customary closing conditions, is expected to close later in the year and be accretive to 2016 financial metrics, Digital Realty said.

BofA Merrill Lynch and Morgan Stanley are serving as Digital Realty's financial advisors, while Latham & Watkins LLP is serving as its legal counsel in connection with the pending acquisition.

For ABRY Partners, Berkshire Partners and Telx, Barclays and DH Capital are serving as financial advisors and Kirkland & Ellis LLP is serving as legal counsel.

Digital Realty said it will provide additional details about the transaction during its second-quarter 2015 earnings call scheduled for Thursday, July 30, 2015.

In another deal marking consolidation in the data center sector, Equinix Inc. (EQIX), a U.S.-based data centre services provider, said in late May that it has agreed to acquire London-based Telecity Group plc (TCY.L), a provider of carrier-neutral data centres, in a cash and stock deal valued at 2.35 billion pounds.

In a separate statement, Digital Realty Trust said it has commenced an underwritten registered public offering of 10.50 million shares of its common stock in connection with forward sales agreements.

The company said it expects to enter into forward sale agreements with Bank of America, N.A., Morgan Stanley & Co. LLC and Citigroup Global Markets Inc., which are referred to as the forward purchasers, with respect to 10.50 million shares.

The company also expects to grant the underwriters a 30-day option to purchase from it up to an additional 1.575 million shares of its common stock to cover overallotments, if any.

BofA Merrill Lynch, Morgan Stanley and Citigroup are the joint book-running managers for the offering.

Digital Realty noted that it will not initially receive any proceeds from the sale of shares of its common stock by the forward purchasers, although it will receive the proceeds from any shares purchased from it pursuant to the underwriters' over-allotment option.

The company expects to use any net proceeds that it may receive upon the future settlement of the forward sale agreements to fund a portion of its pending acquisition of Telx Holdings.

If the underwriters' overallotment option is exercised, the company expects to use the net proceeds it receives to repay outstanding debt under its global revolving credit facility.

DLR is trading at $67.98, down $0.44 or 0.64 percent on a volume of 250,172 shares.