Digital Realty merges with Interxion creating a data center giant

The new company will be uniquely positioned to meet the growing global demand for cloud platforms, service providers and enterprises seeking tailored colocation, cloud data center and hyperscale solutions.

Digital Realty e Interxion have signed a definitive agreement to merge their businesses and create a data center, colocation and interconnection giant. Under the terms of the agreement, Interxion shareholders will receive a fixed exchange rate of 0.7067 Digital Realty shares per Interxion share. The transaction values ​​Interxion's total value at approximately $93.48 per common share or approximately $8.4 billion, including assumed net debt1. Completion of the transaction is subject to customary closing conditions, including approval by Interxion and Digital Realty shareholders.

The resulting company will expand Interxion's strategy of creating and enabling valuable communities of interest in Europe by extending this business model wherever the resulting company has a presence. In addition, Digital Realty's success in developing hyperscale platforms can be replicated and will represent an extension of its connected “campus” strategy. This allows companies to take advantage of the most appropriate services (from colocation to hyperscalar) to create value through the efficient deployment of critical and perfectly connected infrastructure to a solid and growing universe of cloud platforms and connectivity service providers.

The new company will be uniquely positioned to meet the growing global demand from cloud platforms, service providers and enterprises seeking colocation, cloud data center and hyperscale solutions as IT architectures are redesigned to support the explosive data growth of today's business models.

On the other hand, Interxion's business in Europe (which currently has 53 neutral data centers in 11 European countries and 13 cities including Frankfurt, Amsterdam, Paris and Marseille, as the gateway to the Internet) will perfectly complement Digital Realty's European presence, already established in London and Dublin. The merger will result in a strong presence across Europe of data centers offering consistent high quality services with low latency access to approximately 70% of GDP in Europe.

Both companies highlight that Interxion's good relationships with the main global cloud providers, digital media operators and multinational clients significantly strengthen the current Digital Realty platform in Europe. Likewise, Digital Realty's relationships with many of the leading cloud platform operators and other global companies, along with its access to low-cost capital, will significantly expand the resulting company's value offering to a global customer base. Improving the new company's capabilities to address and resolve the public and hybrid cloud architecture requirements of its global customer base will enable it to build relationships with key global customers while allowing it to compete effectively in broader markets.

Interxion has a strong portfolio of data center development projects currently under construction, with nearly more than $400 million invested to date, a total estimated investment of approximately $1 billion. These projects represent approximately 40% of Interxion's expansion of independent critical cargo capacity, are already leased and are expected to be delivered in the next 24 months, representing significant growth potential for the merged company. Additionally, the combined platform will hold the most strategic land in Europe's major growth cities, providing the potential for long-term value creation.

The CEO of Digital Realty, A. William Stein, emphasizes that "this strategic and complementary transaction builds on Digital Realty's fundamentals of serving the colocation, scale and hyperscale market demand in the Americas, EMEA and Asia Pacific and leverages Interxion's interconnection and colocation experience in Europe. By enhancing capabilities, the new company will allow clients to solve the requirements of a broad spectrum of data centers through a global platform."
“The transaction is expected to be beneficial for the future growth of the new organization, and to establish a global platform that we believe will significantly enhance our ability to create long-term value for customers, shareholders and employees of both companies,” he added.

For his part, the CEO of Interxion, David Ruberg, was happy to offer this attractive opportunity to all of our stakeholders while strengthening our ability to provide a truly global platform that meets the needs of our customers. As part of Digital Realty, the stakeholders will have the opportunity to continue to reap the benefits of the value we have created with our focus on the communities of interest of our portfolio of neutral data centers in Europe. They will also be able to participate in the value created by extending our presence through Digital Realty, complementary to the client base and with facilities in the Americas, EMEA and Asia Pacific. We further believe our shareholders will benefit from Digital Realty's balance sheet, investment grade and lower cost of capital. “We look forward to working closely with Bill Stein and the entire Digital Realty team to complete the transaction and merge the best of our companies to build the world's largest data center provider.”

A. William Stein will be the new CEO of the combined company while David Ruberg will serve as CEO of the combined company in Europe, the Middle East and Africa (EMEA), under the name Interxion, a Digital Realty company. Ruberg's transition to his new role as EMEA CEO is expected to last approximately one year following the completion of the transaction. Ruberg will lead the new company's effort to organize and execute a program that identifies and develops high-value communities of interest across the resulting company's platform. He will play a leadership role in some of the new company's key global accounts, bringing long-standing relationships and expertise.

Transaction details

Under the terms of the definitive agreement, a subsidiary of Digital Realty will initiate a tender offer to acquire all of the issued and outstanding common shares of Interxion in exchange for 0.7067 shares of Digital Realty common stock for each share of Interxion common stock (subject to a minimum bid of at least 80% of the outstanding common shares of Interxion, which minimum must be reduced to 66 2/3% by Digital Realty).

Once the transaction is completed, Interxion shareholders will own approximately 20% of the outstanding common shares of the new merged company. Based on Digital Realty's closing stock price of $132.38 as of October 28, 2019, the transaction values ​​Interxion at approximately $93.48 per common share, or approximately $8.4 billion in total enterprise value, including assumed net debt. Digital Realty expects to refinance the debt assumed by Interxion in the transaction with a combination of high-yield corporate investment bonds and proceeds from other financing transactions.

The transaction is not subject to any financial conditions. A special meeting of Digital Realty shareholders will be called to approve the issuance of the company's common stock in the transaction, in accordance with the rules of the New York Stock Exchange. Following the closing of the public offering, following Dutch market practices, Digital Realty and Interxion will effect a corporate reorganization of Interxion and its subsidiaries, which will result in Digital Realty owning 100% of the business of Interxion and its subsidiaries. If less than 95% of Interxion's common shares are tendered, shareholders of this company who have not tendered their shares in the public offering will ultimately receive in the corporate reorganization the same consideration of 0.7067 shares of Digital Realty common stock for each share of Interxion common stock (interest-free and subject to applicable withholding taxes). If 95% or more of Interxion's ordinary shares are tendered, the shareholders of this company who have not submitted their offer will be expelled in accordance with a legal procedure of the Dutch courts by which they will receive in cash an amount determined by Dutch law. An extraordinary general meeting of Interxion shareholders will be convened in connection with the public offer to adopt, among other things, certain resolutions relating to the transaction.

Interxion CEO David Ruberg, who controls approximately 1.3% of Interxion's outstanding ordinary shares, has entered into a bidding and endorsement agreement with Digital Realty, whereby he has agreed to, among other things, tender his shares in the public offering and vote in favor of resolutions related to the transaction at Interxion's extraordinary general meeting.

The operation has been approved by the boards of directors of Digital Realty and Interxion. The transaction is expected to close in 2020 and is subject to Interxion and Digital Realty shareholder approval and customary closing conditions.