Mergers and Acquisitions, Content, Private equity

Digital Realty Acquires Brazil Data Centers, Assets for $2.25B

Digital Realty is acquiring Ascenty and related data center assets for $2.25 billion. The deal, expected to be approved in Q4, positions Digital Realty to gain a major IT infrastructure footprint in Brazil and Latin America.

The deal's valuation represents 15.0 times to 15.5 times underwritten forward stabilized EBITDA, Digital Realty says. Generally speaking that's higher than most MSP and data center deals, which typically are valued at under 10X EBITDA, ChannelE2E believes.

The three-part deal involves:

  • Digital Realty acquiring Ascenty from Great Hill Partners for $1.8 billion
  • Digital Realty paying an additional $425 million of capex to fund related data centers that are already under construction.
  • Brookfield Asset Management paying $613 million for a 49 percent stake in the joint venture between Ascenty and Digital Realty.

Digital Realty will retain Ascenty’s management team -- including CEO and co-founder Christopher Torto, who began the company in 2010 as Metro Fiber Brasil.

Data Center Business Metrics

Digital Realty's revenues for the second quarter of 2018 was $755 million, up  33 percent increase from the same quarter last year. Net income was $88 million, up from $79.5 million in the corresponding quarter of 2017.

The company has leveraged organic growth and M&A deals to drive that revenue expansion. Key milestones include:

  • 2011: Digital Realty started fiber optic network beginning in the state of São Paulo.
  • 2012: Acquired a business, rebranded as Ascenty and opened the company's first data center.
  • 2015:  Acquired Telx for $1.9 billion, doubling its data center footprint and boosting its colocation business.
  • 2016: Purchased eight carrier-neutral data centers in Europe from Equinix in an $874 million deal.
  • 2017: Acquired major competitor DuPont Fabros Technology Inc. for around $7.6 billion.

Virginia Expansion

In a separate transaction, Digital Realty plans to buy 424 acres of undeveloped land in Loudoun County, Virginia for $236.5 million.

The site is located near Washington Dulles International Airport and less than four miles from Digital Realty’s existing data center campuses in Ashburn, Virginia.

The land deal is expected to close in the fourth quarter, subject to closing conditions.

Additional reporting by Joe Panettieri.