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June 8, 2015updated 21 Oct 2016 5:50pm

Equinix: we did not buy Telecity to block the Interxion deal

Interview, Eric Schwartz, EMEA president, Equinix on why the firm did buy its data centre rival

By Sam

"I been saying this repeatedly – the core motivation is a big step to extend our platform in Western and Eastern European markets," says Eric Schwartz, EMEA president at Equinix.

Schwartz was speaking with CBR last week – just days after confirmation that Equinix is to buy TelecityGroup for £2.3bn. The price represented around a 30% premium on Telecity’s share price and the circumstances of the deal, scuppering Telecity’s proposed merger with Nasdaq listed Dutch data centre colo player Interxion has sparked huge interest.

Last week Mr Schwartz was attending a data centre event being held in Monaco. He was being asked constantly about the deal.

"Equinix did not do it to block the other transaction. The motivation is about our business and we have a very clear view of how the two companies combine to build a bigger business," he says.

Was the company’s move to REIT status a factor? A REIT is a Real Estate Investment Trust, which gets favourable tax status in the US which must adhere to particular investment and dividend rules.

Says Mr Schwartz: "We’re covered under the same chapter of US tax code [as firms such as Digital Realty and Du Pont Fabros, both REITs in the data centre business.]. We view ourselves as an operating business with particularly valuable assets. We exist to generate a return on capital for investors and the model is serving particular needs of customers."

"The REIT status applies in the US. For everything outside we’re a local tax payer. Part of the misconception is that that we somehow managed to work some tax magic, but that’s not the case," he says.

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"Our business is high quality data centres, cross connects, internet exchange hosting, cloud exchanges and other services. Over the next six months or more we will extend the cloud exchange where we can serve customers and extend it into Telecity."

The building of exchanges and attracting companies into ecosystems of interest has been an Equinix tactic for several years. But the company insists that while it is interesting to see how the competition is positioning it is not becoming a cloud provider.

"We are a data centre company. We have a stack that doesn’t go up to the hardware or software of our clients. We rub shoulders with cloud providers, some I’ve never heard of who are specialist in particular areas such as specialised cloud implementation and cloud adaptation."

"We’ve added more vertical domain expertise, for example we spent a lot of time with financial services firms getting to understand electronic trading. Now we are looking at other elements of their value chain. We’ve added horizontal expertise on ways that cloud technology and platforms deployed on our sites can be used to solve business problems in the verticals we service."

Mr Schwartz knows he has a big integration ahead with Telecity. "We’ve done it in the past, but not at this scale. We’re much better prepared in a way we wouldn’t have been be two or three years ago."

Will the Equinix takeover of Telecity change the data centre landscape in Europe?

"I think you could see a few other transactions but whether that’s as a result of recent activities or whether that’s based on the actual conditions in the industry and the clumping mentality that goes on in M+A arena is unclear. A number of companies would be excited to see the valuation of Telecity. It is hard to predict. "

The data centre market is relatively bullish says Schwartz, ‘the transition to cloud, when all is said and done, is a net opportunity."

Equinix will close its TelecityGroup acquisition in the first half of 2016.

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