Digital Realty Acquires 55% Controlling Stake in S.A Teraco Data Environments
Africa’s largest data center services provider, Teraco Data Environments, has been acquired by Digital Realty in a deal that values Teraco at an astonishing $3.5 billion. This is Digital Realty’s 3rd acquisition on the African continent following previous ones in Kenya (iColo) and Nigeria, (Medallion) respectively.
“We are excited to enter our next chapter by joining forces with Digital Realty to create a truly global, scaled platform serving our customers in Africa and beyond,” said Teraco Chief Executive Officer, Jan Hnizdo. “Our combined platform will be uniquely positioned to serve the full customer spectrum with the ability to support their growth around the world. We look forward to working with the Digital Realty team to extend our state-of-the-art data center and connectivity solutions to capitalize on the favorable industry trends and tremendous market opportunity.”
Digital Realty Chief Executive Officer, A. William Stein added, “This highly strategic transaction immediately cements Digital Realty as the leading colocation provider in Africa, a region experiencing a rapid digital transformation. Teraco is the industry leader in South Africa and the continent’s connectivity hub. This investment will enhance our ability to serve customers on a global basis by adding a significant regional scale with a premier, network-dense portfolio in South Africa’s most strategically important metro areas. Teraco will also advance our strategy of increasing exposure to highly connected, network- and carrier-dense facilities to enhance our global coverage and connectivity capabilities.”
This acquisition implies that Teraco, which was launched just 13 years ago, is now worth more than twice as much as Telkom, which had a market capitalization of $1.7 billion at the close of the Johannesburg Stock Exchange on Monday. The transaction will also enable a stronger Teraco.
Teraco is the largest and most densely interconnected data center platform in Africa, with seven state-of-the-art facilities strategically located in the key South African metros of Johannesburg, Cape Town, and Durban. Teraco serves over 600 customers, including more than 275 connectivity providers, over 25 cloud and content platforms, and approximately 300 enterprises.
Teraco facilitates approximately 22,000 interconnections between customers and its Isando campus in Johannesburg is one of the most densely interconnected sites in the world, with over 13,000 cross-connects. Teraco also hosts seven on-ramps to leading global cloud service providers in Johannesburg and Cape Town and currently provides direct access to seven subsea cables in Durban on the east coast and Cape Town on the southwest coast.
Digital Realty, which is listed on the New York Stock Exchange and describes itself as the “largest global provider of cloud and carrier-neutral data center, co-location and interconnection solutions”, is acquiring a majority stake (55%) in Teraco from a consortium of investors, including Berkshire Partners and Permira. Teraco management will remain invested in the company.
Breakdown of the deal
After closing the deal, Digital Realty will have about 55% ownership of the total equity interest in Teraco, while the remaining 45% will remain with a consortium of existing shareholders, including management, Berkshire Partners, Permira, Van Rooyen Group, Columbia Capital, Stepstone Ventures and the Teraco Connect Trust.
The deal is expected to close in the first half of 2022. Goldman Sachs is acting as financial advisor to Teraco and Weil, Gotshal & Manges and ENSafrica are serving as legal advisors to Teraco. Solomon Partners is acting as a financial adviser, and Latham & Watkins and Bowmans are acting as legal advisors to Digital Realty.