Digital Realty to Acquire Ascenty in Nearly $2B Deal
Brookfield Infrastructure, an affiliate of Brookfield Asset Management, has committed to fund half of the required initial equity investment, currently estimated to be approximately $613 million.
SAN FRANCISCO—A subsidiary of locally-based Digital Realty has signed a definitive agreement to acquire Latin America data center provider Ascenty from private equity firm Great Hill Partners of Boston in a deal valued at approximately $1.8 billion.
The firm also reports that Brookfield Infrastructure, an affiliate of Brookfield Asset Management, has committed to fund half of the required initial equity investment, currently estimated to be approximately $613 million, excluding Brookfield’s share of the transaction costs, in exchange for 49% of the total equity interests in a joint venture entity expected to ultimately own Ascenty.
“We are pleased to expand our global footprint into Latin America and to partner with the Ascenty management team and Brookfield. We expect this acquisition will further accelerate our growth while enhancing our ability to support our customers’ digital transformation across the globe,” states Digital Realty CEO Bill Stein.
Ascenty operates an in-service portfolio of eight state-of-the-art data centers located in the key Brazilian metro areas of São Paulo, Campinas, Rio de Janeiro and Fortaleza. Most of the Ascenty facilities have been designed and built to Tier III standards and meet internationally recognized facility and service standards.
“We are incredibly proud of Great Hill’s tenure as the majority investor at Ascenty, where we worked closely with CEO Chris Torto and his leadership team to expand the company’s initial platform to 14 data centers and a nearly 4,500 km fiber network,” states John Hayes, co-founder and senior advisor at Great Hill Partners and chairman of the board of Ascenty. “It has been an exciting and rewarding journey to partner with Chris for the third time, and we are pleased that together we successfully built the largest data center company in Brazil.”
Ascenty serves a blue-chip customer base comprised primarily of leading global hyperscale cloud providers, with more than 90% of Ascenty’s contractual cash rent attributable to customers whose parent entities have investment-grade or equivalent credit ratings. In addition, leases representing approximately 75% of Ascenty’s contractual cash rent, including signed but not yet commenced leases and leases pending execution that are subject to closing or other conditions, are denominated in US dollars, substantially mitigating foreign currency exposure, Digital Realty explains in its announcement.
The Ascenty portfolio is comprised of 106.2 megawatts of total planned capacity, including 39.2 megawatts of capacity currently in-service, 34.0 megawatts of capacity under construction and 33.0 megawatts of potential additional capacity. In addition, Ascenty has options or leases on five separate sites representing up to an estimated incremental 66.5 megawatts of potential future growth capacity.
The firm provides differentiated connectivity solutions to its data center clients through a proprietary, 4,500-kilometer fiber optic network connecting Brazil’s primary technology, finance, and population hubs of São Paulo, Campinas, Rio de Janeiro and Fortaleza. The fiber optic system is owned by Ascenty and represents a key competitive advantage, providing customers direct access to the major Brazilian telecom operators, peering points and subsea cable networks, company officials state.
The Ascenty management team will remain in place and will maintain day-to-day responsibility for operations in the region. The Ascenty management team is led by CEO Christopher Torto, who co-founded Ascenty and previously founded Vivax, the second largest cable TV company in Brazil, which went public in 2006 and was sold in 2007. Torto is rolling forward the substantial majority of his Ascenty equity into Digital Realty operating partnership units and equity in the new joint venture, Digital Realty reports.
The gross purchase price for Ascenty is approximately $1.8 billion (before contractual purchase price adjustments, transaction expenses, taxes and potential currency fluctuations), in addition to approximately $425 million of capital expenditures to fund the completion of data center development currently under construction and to build out additional capacity to meet near-term customer demand. The $2.25-billion of total estimated capital invested represents a multiple of approximately 15.0 – 15.5 times underwritten forward stabilized EBITDA.
The transaction is expected to close in the fourth quarter of 2018. Digital Realty’s agreement with Brookfield is also expected to close in the fourth quarter of 2018.
Upon consummation of the transaction, Ascenty will enter into a $50-million senior secured first lien revolving credit facility, a senior secured first lien term loan facility of up to $650 million, and a $75-million senior secured first lien delayed draw term loan facility. Citi, ING and Natixis are acting as joint lead arrangers and joint bookrunners on the facilities.
BofA Merrill Lynch is serving as Digital Realty’s financial advisor and Latham & Watkins LLP is serving as Digital Realty’s legal counsel on the pending acquisition. DH Capital is serving as financial advisor and Choate, Hall & Stewart LLP is serving as legal counsel to Ascenty on the pending transaction.
Digital Realty also announced today that it has signed an agreement to acquire a large parcel of undeveloped land near Washington-Dulles International Airport in Loudoun County, VA for approximately $237 million.
In 2017, Digital Realty acquired DuPont Fabros based in Washington, DC in an all stock-transaction that at closing was valued at approximately $7.8 billion.