Digital Realty Buys Ascenty for $1.8B|
September 26, 2018
Realty's Brazilian subsidiary, Stellar Participações has entered into a
definitive agreement to acquire Ascenty, a data center provider in Brazil, from
private equity firm Great Hill Partners in a transaction valued at approximately
$1.8 billion. Digital Realty has separately entered into an independent
bilateral equity commitment letter with Brookfield Infrastructure, an affiliate
of Brookfield Asset Management, one of the largest owners and operators of
infrastructure assets globally, under which Brookfield has committed to fund
half of the required initial equity investment, currently estimated to be
approximately $613 million, excluding Brookfield's share of the transaction
costs, in exchange for 49% of the total equity interests in a joint venture
entity expected to ultimately own Ascenty.
Significant embedded growth pipeline: The Latin American region represents a compelling opportunity for future data center growth, driven by positive macro and demographic factors, including growth in the working age population and rapid digitization. Brazil is the fifth-largest country in the world by area and population as well as the eighth-largest economy by gross domestic product, and is poised to become the hub of Latin America's future technological expansion. Ascenty has a significant opportunity for growth through future development in Brazil and is well-positioned to meet growing demand through expansion across the Latin American region. The Ascenty portfolio is comprised of 106.2 megawatts of total planned capacity, including 39.2 megawatts of capacity currently in-service, 34.0 megawatts of capacity under construction and 33.0 megawatts of potential additional capacity. In addition, Ascenty has options or leases on five separate sites representing up to an estimated incremental 66.5 megawatts of potential future growth capacity.
Proprietary fiber network represents
competitive advantage: Ascenty provides differentiated connectivity solutions to
its data center clients through a proprietary, ~ 4,500-kilometer fiber optic
network connecting Brazil's primary technology, finance, and population hubs of
São Paulo, Campinas, Rio de Janeiro and Fortaleza. The highly reliable fiber
optic system is owned by Ascenty and represents a key competitive advantage,
providing customers direct access to the major Brazilian telecom operators,
peering points and subsea cable networks.
Co-investing alongside an experienced partner: Brookfield is a leading global asset manager, with over $285 billion of assets under management. Brookfield has been investing in Brazil for over 100 years, and is now one of the largest investors in the country, with over $40 billion of assets under management, including: more than 3,500 kilometers of toll roads; an integrated rail and port logistics business; a 2,000-kilometer regulated natural gas pipeline system; 4,200 kilometers of electricity transmission lines (including lines built and to be constructed); the largest private sanitation company; and several commercial and retail properties, including a portfolio of high-quality commercial properties in São Paulo and Rio de Janeiro. Digital Realty expects to benefit significantly from investing alongside a sophisticated partner with a long history of investing in the region.
Potential for Significant Regional Cost Efficiencies and Financial Benefits: We believe the combination of the Ascenty business with Digital Realty's global operating platform will create significant cost efficiencies, particularly with respect to the establishment of a regional operating platform in Latin America, supply chain management, and financing costs. The venture is prudently financed with ample liquidity from non-recourse debt facilities and expected equity investments from existing Ascenty management as well as a sophisticated financial partner in Brookfield along with Digital Realty. The Ascenty acquisition is expected to be initially dilutive to financial metrics but is expected to be accretive to financial metrics over the intermediate term and accretive to Digital Realty's long-term growth rate.
"We are pleased to expand our global
footprint into Latin America and to partner with the Ascenty management team and
Brookfield. We expect this acquisition will further accelerate our growth while
enhancing our ability to support our customers' digital transformation across
the globe," said Digital Realty Chief Executive Officer Bill Stein. "This
transformative transaction represents consistent execution against the new
market strategy we articulated at our Investor Day last December, and
immediately establishes us as a market leader within an historically
under-served region poised for rapid growth. We are also gratified to partner
with Brookfield on this transaction, leveraging their extensive experience as a
regional investor and operator. This acquisition advances our strategy of
sourcing strategic and complementary assets to strengthen and diversify Digital
Realty's data center portfolio and expand our product mix and global footprint."