Blackstone Acquires QTS Realty Data Center Business

Blackstone is acquiring QTS Realty Trust for $10 billion, including debt, the investment firm and data center operator have disclosed.

The deal’s valuation is a lofty 26.1 times estimated enterprise value/EBITDA for 2022, according to brokerage firm Stifel.

This is technology M&A deal number 311 that ChannelE2E has covered so far in 2021. See all technology M&A deals for 2021 and 2020 listed here.

QTS Realty Trust operates data centers across North America and Europe. The company’s total data center footprint spans more than 7 million square feet.

QTS has M&A experience, and the data center operator has been in revenue growth mode. For Q1 of 2021:

  • Total revenue was $148.7 million, up from $126.3 million in Q1 of 2020.
  • Net income was $7.9 million, down slightly from $8.2 million Q1 of 2020.

QTS Buyout: Will Alternative Bidders Emerge?

The Blackstone-QTS deal includes a 40-day “go-shop” period that expires on July 17, 2021. The go-shop clause allows QTS to seek and consider alternative bids for the data center business.

At least one analyst thinks it’s unlikely that an alternative strategic buyer will emerge. The reasoning: Potential M&A deals with rivals such as CyrusOne and/or Digital Realty Trust would likely be dilutive, and would involve overlapping markets, Stifel analyst Erik Rasmussen said, according to SeekingAlpha.

Rasmussen believes QTS may, nevertheless, garner interest from private equity and various types of investment funds, the report said.

Blackstone Acquires QTS: Executive Perspectives

Assuming Blackstone emerges as the finalized buyer, QTS will continue to be led by its senior management team and maintain its corporate headquarters in Overland Park, Kansas, the announcement said.

In a prepared statement about the deal, Philip Trahanas, lead director of the QTS board of directors, said:

“We are pleased to enter into this transaction with Blackstone, as it will deliver compelling, immediate and certain value to stockholders while positioning QTS to continue supporting customers’ expanding data center infrastructure needs. The QTS Board regularly reviews the Company’s strategy and market opportunities to maximize stockholder value, and we are confident this transaction achieves that objective.”

Added Chad Williams, chairman and CEO of QTS:

“QTS is powered by its people and continues to set a new standard for service delivery in the data center industry. We see a significant market opportunity for growth as hyperscale customers and enterprises continue to leverage our world-class infrastructure to support their digital transformation initiatives. We are confident this transaction is the right step to achieve our strategic objectives in our next phase of growth. I want to thank each of our QTS employees for their continued dedication to a culture of service to others, which has positioned QTS to enter into this transformative transaction.”

Greg Blank, senior managing director, Blackstone Infrastructure Partners, said:

“We are delighted to back QTS and its world-class management team as they continue to scale the company to meet the rising demand for data centers. QTS aligns with one of Blackstone’s highest conviction themes – data proliferation – and the required investment makes it well suited as a long-term holding for our perpetual capital vehicles. We are committed to a strong, lasting partnership, leveraging Blackstone’s scale, reach, resources and access to capital to drive long-term growth at QTS.”

Concluded Tyler Henritze, head of acquisitions Americas for Blackstone Real Estate:

“We are focused on investing in assets that are benefitting from strong, secular tailwinds, such as the rapid digitalization of data. QTS is a leading provider of data center solutions with a portfolio of high-quality assets in desirable markets, positioning it well to capitalize on these powerful trends in the data center space. We believe the vast expertise across our business will enable the QTS platform to succeed over the long-term.”

The deal is expected to close in the second half of 2021, subject to approval by QTS’ stockholders and the satisfaction of other customary closing conditions, the firms say.

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