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By | Paul Kunert 11th February 2015 16:13

Vows exchanged as Telecity and Interxion prepare to wed

Euro data centre consolidation. Why? Only the big will survive

A merger between Telecity and Interxion made public on Wednesday will create a £600m-plus sales heavyweight in the European carrier-neutral data centre space, if it's agreed by shareholders that is.

The duo confirmed a non-binding $2.2bn all-share pact: the proposed transaction is to be structured as an offer by London-listed Telecity, whose shareholders will own 55 per cent of the stock.

The rationale for the deal is greater scale, a wider portfolio of data centre connectivity services, and is in response to ramping demand for businesses using cloud services, the companies said.

Interxion CEO David Ruberg would become CEO of the combined entity for twelve months following completion of the sale, expected in the second half of this year. Telecity’s John Hughes and John Baker would act as chairman and deputy chairman respectively.

There are of course back-end costs the businesses can squeeze out to flatter the bottom line, and “total synergies” with a net value of £600m have already been identified. However, the break down of these was not provided, but no doubt staff will be watching their backs.

The deal is subject to the “satisfactory completion” of “mutual due diligence”, approval by both sets of boards, the negotiation of definitive transaction documentation, shareholder approval and regulatory and antitrust approvals.

The combined revenues of the organisations based on 2014 numbers is roughly £602m, with an EBITDA, or earnings before interest, taxes, depreciation, and amortization (a commonly used metric when assessing the overall performance of a company) of £272m.

The borg will “turn up the heat on other major European data centre players,” said Philip Carse, an analyst at Megabuyte.

Kate Hanaghan, research director at TechMarketView, said the data centre market is all about “scale and scope of product”.

“In other words, customers want access to highly resilient data centres with good geographical coverage for services that cover straight co-location through to complex and highly secure private clouds,” she said.

Demand for these services will only ever go one way with more enterprises starting to consume technology as a service, TMV added.

London-listed Telecity today also released calendar 2014 numbers, with sales up 9.2 per cent to £348.7m, although rising admin costs and one-off charges weighed down operating profit to £90m from £98.3m.

Finance costs left the business with a bottom line of £81m, versus £88.4m.

In prelims from New York-listed Interxion, sales for the fourth quarter and the full year are expected to grow 15 per cent and 11 per cent respectively to €89.9m and €340.6m. It talked about adjusted EBITDA of €38.7m for the quarter, up 14 per cent, and €146.4m for the year, up 11 per cent. ®

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