Digital Realty Trust (DLR US) recently announced the acquisition of publicly listed competitor, DuPont Fabros Technology (DFT US) for US$4.95 billion plus the assumption of debt totalling US$1.6 billion.
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The transaction will be financed with 0.545 Digital Realty shares for every share owned in DuPont Fabros. Existing Digital Realty will hold about 77% of the combined company with the remainder 23% being held by existing DuPont Fabros shareholders. The acquisition is expected to close in the second half of 2017 and requires shareholder approval from both companies.
Why is this significant for Digital Realty?
1. Adds to scale and growth areas
Digital Realty is already one of the world’s largest data centre Real Estate Investment Trusts (“REIT”) and this will add to its scale. Importantly, it will add 12 data centres in growth regions in the U.S. such as Silicon Valley, Chicago and Northern Virginia to its existing portfolio of 145 data centres in 12 countries.
Adding these 12 data centres will add to Digital Realty’s capabilities in servicing the growing hyper-scale and cloud markets. The combined company will have about 26% of its revenues come from cloud customers such as Microsoft, IBM and Facebook.
The acquisition will enhance Digital Realty’s exposure to large scale data centres of 10MW+ to add to its existing offering of mostly medium sized data centres of between 500kW to 5MW in size.
Dupont Fabros also brings with it a US$750 million development pipeline of 6 additional data centre development projects currently under construction, which are 48% pre-leased and are expected to be delivered within the next 12 months. These projects are located in metropolitan areas in the U.S. and Canada where Digital Realty has an existing presence.
At the time of writing, the AtlasTrend Big Data Big Fund owned shares in Digital Realty Trust.
How does this transaction impact Digital Realty’s earnings and competitive positioning?
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