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May 7, 2015updated 21 Oct 2016 5:48pm

Commercial data centre wars – Interxion reacts to $3.5bn Equinix bid for Telecity

Data centre merger battle update: Dutch operator Interxion says original $2.2bn merger with Telecity is still on but rival talks mean an end to exclusivity terms

By Sam

The commercial data centre market has never seen anything like it.

Today’s statement from Telecity Group that is was subject to a $3.5bn bid from Equinix while it is itself in advanced merger talks with Interxion has thrown the UK data centre sector into the spotlight.

Equinix reacted to the Telecity Group statement with a statement of its own confirming its interest. This in turn prompted a statement from Interxion, the Nasdaq listed Dutch based data centre firm for which Telecity had proposed to acquire in March for $2.2bn.
The Interxion statement says: "Interxion…issued the following statement in response to the announcement today by TelecityGroup plc confirming that TelecityGroup has entered into discussions concerning a possible takeover offer for TelecityGroup by Equinix.

"On 9 March 2015, Interxion and TelecityGroup announced an agreement to implement a recommended all-share merger (the "Merger") (the "Implementation Agreement") which was unanimously approved by both boards. Interxion remains committed to the transaction with TelecityGroup on the terms as agreed by the parties, and both parties continue to work to progress the transaction.

As announced earlier, the Merger has received clearance by the Federal Cartel Office of Germany, an important milestone in the regulatory approval process. Interxion continues to believe that the pending Merger with TelecityGroup is a strategically compelling combination that delivers meaningful value to Interxion and TelecityGroup shareholders as well as their customers."

"Pursuant to the terms of the Implementation Agreement, TelecityGroup’s entrance into discussions with Equinix releases Interxion from its exclusivity obligations with TelecityGroup during the pendency of the discussions. Interxion will make further announcements regarding the Merger as and when appropriate."

The TelecityGroup statement which sparked today’s activity said: "The Board of TelecityGroup today announces that it has received an approach from Equinix, Inc. ("Equinix") regarding a possible offer for TelecityGroup at 1145 pence per share. The consideration would be payable in a mixture of cash and Equinix stock – approximately 54% of the consideration would be payable in cash and approximately 46% in Equinix stock."

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"As noted in the joint announcement made by TelecityGroup and Interxion Holding N.V. ("Interxion") on 9 March 2015, the implementation agreement that has been entered into by TelecityGroup and Interxion prohibits either Interxion or TelecityGroup from soliciting alternative proposals and from discussing alternative proposals except in limited circumstances. One of the exceptions to the restriction on entering into discussions with a third party regarding an alternative proposal is where the directors of the relevant party believe they are required to do so by virtue of their fiduciary duties or other applicable law."

"Having carefully considered the Equinix proposal in the light of this exception, the Board of TelecityGroup has determined that it is required by virtue of its fiduciary duties to enter into discussions with Equinix and has decided to permit Equinix to undertake a short period of due diligence."

Earlier today TelecityGroup issued its Q1 trading statement of 8% – 10% revenue growth on an organic currency neutral (‘OCN’) basis – Stable EBITDA margin with slight downside pressure from investment Financial Highlights – OCN revenue growth of 6.5%, underlying(1) revenue growth of 9.6%, slightly ahead of management expectations – Adjusted EBITDA margin of 46.6%, reflecting investments made in sales and marketing to drive profitable growth – Net debt to EBITDA of 1.7x driven by continued strong operating performance and capital discipline Operational Highlights – Group sold power percentage(2) increased 190bps to 75.2% versus 31 December 2014 – At the end of Q1 2015 available customer power was 113.5MW, up 1.7MW versus 3.4MW net power sold in Q1

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