Equinix to Buy Some Verizon Data Centers for $3.6 Billion -- Update

By Drew FitzGerald and Austen Hufford 

Equinix Inc. agreed to pay Verizon Communications Inc. $3.6 billion for a portfolio of 24 data center sites in a transaction that will expand its operations deeper into more U.S. cities and Latin America.

The all-cash deal, announced Tuesday, will boost Equinix's data center count to 175 data centers around the globe, giving it properties in 15 metro markets including Bogotá, Colombia as well as Houston and Culpeper, Va. The transaction is expected to close in the middle of next year.

Verizon joins several telecom companies that have cast off underperforming physical assets to focus on services they consider the core of their business. CenturyLink Inc. last month struck a $2.3 billion deal to sell its data center business to a private-equity consortium led by BC Partners.

Verizon has also has sold off parts of its landline operation to Frontier Communications Corp. and cell tower assets to American Tower Corp. in recent years while spending cash on Web companies like AOL and Yahoo Inc.

Verizon Chief Executive Lowell McAdam said at an investor conference Tuesday that Verizon didn't have very much scale in data centers so it was better to sell them and put that money to better use. The carrier wants to "trim the branches of the tree so the tree can be stronger," Mr. McAdam said.

Many carriers have struggled to earn sales in buildings they control because their rivals are wary of paying a competitor. CenturyLink last year acknowledged revenue in its data center business was declining.

But for Equinix, the acquisition of the slow-growing assets will help build its footprint and expand its customer base. "All of the assets to us are very strategic," President Karl Strohmeyer said.

Equinix said the new data centers serve about 900 customers, many of which are new to the company. The Redwood City, Calif.-company runs a portfolio of data centers around the world where Web companies and data carriers, including Verizon, hook up to each others' networks. The landlord is a tax-advantaged real-estate investment trust.

The deal is Equinix's biggest acquisition since its 2015 purchase of U.K. peer Telecity PLC, also worth about $3.6 billion when the deal was struck.

Equinix executives said it has the capacity to pay for the purchase on its own but will likely raise debt and equity.

Shares of Equinix rose 2.3% to $339.85 Tuesday morning, while Verizon shares climbed about 1.5% to $50.48.

--Ryan Knutson contributed to this article.

Write to Drew FitzGerald at [e-mail] and Austen Hufford at [e-mail]

(END) Dow Jones Newswires

December 06, 2016 11:59 ET (16:59 GMT)

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