Equinix, Inc., provider of global data center services, reported yesterday that it has reached a definitive agreement to acquire Switch & Data Facilities Company, Inc. (NASDAQ: SDXC), a leading provider of data center and Internet exchange services, for approximately $689 million in cash and stock. The acquisition represents a significant market expansion for Equinix and will expand the company’s market presence by adding 16 new markets across North America, including additional 34 data centers in 22 markets in the U.S. and Canada.
The combination of the two companies will further strengthen Equinix’s position in the global data center services market by extending the company’s presence to 16 new markets across North America. Equinix will integrate Switch and Data’s data center business and operations in the U.S. and Canada. It will also increase the Global presence of Equinix leaving the new combined entity with 79 data centers in 34 markets and more than six million square feet across the North American, European and Asia-Pacific markets. The company now has a platform to expand into strategic markets such as Atlanta, Denver, Miami, Seattle and Toronto.
The acquisition is a response to two current trends in the industry; the growth of online information storage and the increase in new distribution strategies for digital assets. The Switch & Data Facilities transaction should give Equinox customers expanded access to local markets for their network edge deployments, and Switch and Data customers an expanded solution for their global data center needs. Customers from both companies are expected to have access to an expanded portfolio of current and future product offerings.
Steve Smith, president and CEO of Equinox commented on the transaction, “The strategic acquisition of Switch and Data by Equinox further strengthens Equinox’s position as the most comprehensive global data center services provider across North America, Asia-Pacific and Europe,” “Our complementary business models, coupled with Switch and Data’s broad North American market coverage, provide a platform for strong growth as well as an opportunity to accommodate our customers’ demands for additional services.”
Keith Olsen, president and CEO of Switch and Data, said, “For more than a decade, Switch and Data has provided collocation and data center services to support the needs of the world’s leading online brands,” “These businesses rely on Switch and Data to provide secure locations for them to connect and safeguard their mission-critical applications. The combination of Switch and Data’s North American site footprint and Equinix’s global reach will increase our addressable market, enhance our customers’ value, and drive incremental value to our stockholders.”
Both companies are targeting completion of the transaction in the first quarter of 2010. The transaction will be subject to customary closing conditions, including the approval of Switch and Data’s stockholders and regulatory approvals. The transaction is expected to qualify as a tax-free exchange to Switch and Data’s stockholders with respect to the stock portion of the merger consideration. Equinix was advised by J.P. Morgan Securities Inc. and Davis Polk & Wardwell LLP. Switch with Data’s lead financial advisor for the transaction being Piper Jaffray & Co., and Deutsche Bank Securities Inc. and RBC Capital Markets served as co-advisors; Switch and Data’s legal advisor was Holland & Knight LLP. Raymond James & Associates, Inc. provided a fairness opinion to Switch and Data’s Board of Directors with respect to this transaction.
Under the current terms of the agreement, Switch and Data stockholders will have the opportunity to elect to receive either 0.19409 shares of Equinix stock or $19.06 in cash for each share of Switch and Data stock. The overall consideration to be paid by Equinix in the acquisition will be 80% Equinix stock, 20% cash. If more than 80% of Switch and Data’s stock elect to receive Equinix stock or holders of more than 20% of Switch and Data’s stock elect to receive cash, the merger consideration will be pro-rated to achieve these proportions. In addition, a portion of the cash consideration payable to Switch and Data stockholders may be replaced by an equivalent amount of Equinix stock to the extent necessary to enable the transaction to qualify as a tax-free exchange. The cash portion of the merger consideration will be financed through Equinix’s existing cash on hand. Switch and Data’s directors, executive officers and certain of its significant stockholders have agreed to vote shares representing 35% of Switch and Data’s outstanding stock in favor of the transaction.