Telecity Group will be purchased by Equinix, the US's largest data centre company by value, it emerged on Friday (May 29th).
The deal is worth £2.35 billion and marks the end of Telecity's pursuit of Dutch company Interxion Holding NV.
In a statement, Telecity said that its board had recommended Equinix's offer and it was terminating an all-stock deal to buy Interxion for $2.2 billion (£1.44 million).
Telecity is a data centre and co-location centre provider. It has operates 37 data centres in European cities including London, Amsterdam, Helsinki and Manchester. The company specialises in designing, building and managing highly connected data environments where clients can host telecoms, internet and IT infrastructures.
"Like getting married"
When the cash-and-shares deal is completed, it will create the largest data centre company in Europe. The bid gives each Telecity shareholder 572.5p in cash and 0.03 of Equinix shares per Telecity share.
Telecity shareholders will own about ten per cent of the combined entity.
John Hughes, chairman of Telecity will join the Equinix board. He told the Financial Times that the merger presented the best option for its shareholders.
"It's like getting married, you need both parties to be ready at the same point in time. Somehow, somebody has to ask the other," he said.
Mr Hughes also explained that there has been extensive discussion with all of the company's major shareholders.
"There is a great groundswell of support for this transaction," he added.
Stephen Smith, chief executive of Equinix agreed, saying that the Telecity deal was a better fit than the Interxion deal that was also being considered.
"Once we decided the timing was right to extend ourselves and make ourselves bigger and broader in Europe, we felt it was the right time [to bid for Telecity]," he said.
Financial experts echo these views, saying that the deal looks good for both sides. It was "no great surprise that Telecity should plump for a bid from Equinix over the Interxion merger given the share price premium on offer," analysts at Megabuyte said.
Shares in Equinix have risen 35 per cent over the past 12 months, giving the company a market value of $15.3 billion.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.