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August 21, 2015

Google and Amazon race to buy $700m Tata data centres

DC business sale could help reduce the company’s $1.4bn debt.

By Joao Lima

Web titans Google and Amazon are reportedly involved in talks with the Tata Group to buy the organisation’s data centre business from Tata Communications.

The companies are looking to acquire the firm’s 44 data centres in a transaction expected to reach $650 million to $700 million, according to The Economic Times.

CBR first reported Tata Communications data centre sell off on July 23. Exclusively speaking to CBR, Kersti Klami, senior manager Europe and corporate communications at Tata Communications, confirmed the company was "looking at a range of strategic options concerning the future ownership of our data centre infrastructure in India, and possibly in Singapore."

Google and Amazon are still competing with other bidders including the Blackstone Group, Carlyle, KKR, Bain Capital and Advent International.

The companies are looking to buy up to 74% stake of Tata’s data centre arm, the ET reported.

Tata Communications is looking to sell its data centre business to help pay its debt bill, which investors said stands at $1.4 billion as of July.

A source told the ET: "The initial round of bids have already come and we are in the midst of advancing the process."

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In a statement, Tata Communications said it had retained Jefferies LLC to advise the company in connection with exploring these strategic alternatives.

Tata Communication’s data centre space had a $150 million revenue and $40 million in operating profit last year, the company’s 2014 financial report shows.

In the report it says: "In the long run, unless the company is able to raise equity funding, its ability to raise additional debt funding may be restricted. This, in turn, could adversely affect the capital expenditure programme in the long run."

The company owns 44 collocation spaces worldwide, including the UK and the US, with over one million square feet of commercial space, according to the Times of India.

Tata Communications said it does not intend to make any further press release or announcement regarding the sale of its data centre business unless and until it enters into a binding, definitive agreement with respect to its sale of its data centre infrastructure in India and/or Singapore.

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