Equinix Inc share price, to acquire Telecity Group in a £2.35-billion deal

Equinix Inc, the largest US data center operator by value, said on Friday it has agreed to acquire UK-based peer Telecity Group Plc in a £2.35-billion cash-and-stock deal that ends Telecitys negotiations to buy Dutch competitor Interxion Holding NV.

The latest step of consolidation in the industry in Europe offers Telecity shareholders 1 145 pence per share, with 572.5 pence payable in cash and the rest as new Equinix shares at the ratio of 0.0327 per Telecity share. The offer represents a 34.9% premium over Telecitys closing price of 849 pence on February 10th, the last business day before it announced the previously proposed merger with Dutch rival Interxion. Upon completion of the deal, expected in the first half of 2016, shareholders of the UK-based data center operator will own 10.1% of the combined company.

In February, Telecity announced it had entered merger talks with the Dutch group over a £2.2-billion all-stock deal that would have created a strong competitor on the continent, and in March Equinix launched a £2.3-billion offer to convince Telecity to enter into talks.

Encouraging M&A activity in the industry is the push by data centers companies to tap growing demand for their services across new geographies, fueled by the growing use of data on mobile phones and cloud computing, the ability to save and access content that is remotely stored in millions of servers. Apart from building their own data centers, companies are increasing expenditures on outsourcing data management and IT handling to such co-location companies like Telecity and Equinix, where space is rented.

According to Cisco Systems Inc, global internet traffic will triple over the next five years, with mobile data flow projected to surge eleven-fold between 2013 and 2018.

Telecity Executive Chairman John Hughes, who will join the board of Equinix as the deal is completed, said: “Having carefully considered all our options, the Board believes this is a compelling offer and an excellent outcome for shareholders, employees and customers.”

Equinix, founded in 1998 and with a current market value of over $15 billion, derives a significant portion of its revenue from providing data storage for financial services companies, but also has technology and telecom behemoths like Google Inc and Vodafone Group Plc in its client portfolio. The US company, running over 100 data centers worldwide, already has a strong foothold in Europe that will be further strengthened with the purchase of Telecity which operates in major European cities such as Frankfurt, London and Paris.

The addition of the UK-based companys businesses will considerably strengthen “Equinixs offering to customers in Europe and beyond, reinforcing us as a global leader in global interconnection and data centres,” said Equinix chief executive Stephen Smith.

Equinix Inc settled 0.30% lower on Thursday at $269.19 per share on the NASDAQ, marking a one-year increase of 40.78% and valuing the company at $15.32 billion. According to CNN Money, the 13 analysts offering 12-month price forecasts for Equinix Inc have a median target of $275.00, with a high estimate of $300.00 and a low estimate of $243.00. The median estimate represents a +2.16% increase from the last price of $269.19.