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January 29, 2016updated 21 Oct 2016 5:32pm

Digital Realty to buy rival data centre operator Interxion – reports

News: Further consolidation mooted in the UK and European commercial data centre space.

By Sam

Digital Realty, the multi-billion dollar commercial data centre operator is reportedly interested in buying Interxion, the NYSE listed data centre firm with operates 20 data centres, mostly in Europe.

The commercial data centre market has been undergoing consolidation at every level.

Last year Interxion had its prospective deal to merge with UK and European player Telecity scuppered when global firm Equinix stepped in and bought the company for $3.5bn. This deal closed this month following regulatory approval.

Speaking with CBR in June, Equinix EMEA President Eric Schwartz said its purchase of Telecity for its own business reasons and not to kill the Interxion deal.

In July Digital Realty bought data centre operator Telx for $1.9bn. Telx is mainly US based and operates mainly communication hubs.

Market watchers are saying any Digital approach for Interxion would make sense as it is relatively weak in terms of European presence. Yesterday Interxion’s share price rose 8% on reports of the interest.

At the opposite end of the scale London Data Centre City Lifeline announced its sales to managed service provider Redcentric for £4.8m.

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Greg McCulloch, MD at Aegis a privately backed single site boutique commercial data centre based in Surrey said he expects to see further buyouts and mergers at every level of the industry. McCulloch, a former Interxion MD said Aegis had recently completed another funding round.

Steve Wallage, MD at data centre market watcher Broadgroup said in a blog: "The ‘elephant in the room’ [at its recent data centre financial forum event) is what will happen to Interxion. The jilted bride from the TeleCity/Equinix deal remains a unique asset in terms of its size and spread of locations.. Which brings us neatly to Digital Realty. This is a company that has seriously and fundamentally changed in the last 12 months…And behind all this is the acquisition of TelX, a transformative deal for Digital. Interxion, whose stock price rose ~8% yesterday on hopes of a Digital bid. It has challenges for Digital, not least the timing with much work still to do around TelX. However, Digital has been too timid before when faced with potential opportunities. If another buyer appears for Interxion, it is something it will long regret."

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