Digital Realty completed its acquisition of Telx on October 9, 2015, for approximately $1.886 billion, subject to adjustments under the merger agreement. The cash purchase was funded through several sources, including preferred stock, private note placements and a common-stock forward-sale settlement.
When did Digital Realty acquire Telx, and for how much?
Digital Realty announced a definitive agreement to buy Telx from private-equity firms ABRY Partners and Berkshire Partners on July 14, 2015. The announced transaction value was $1.886 billion. The company said the deal was expected to close later that year, subject to customary closing conditions. Digital Realty’s July 14 announcement
The acquisition was completed on October 9, 2015. In its completion filing, Digital Realty reported an approximately $1.886 billion purchase price, subject to adjustments. The announcement value and final purchase price are therefore best described as approximately the same amount, not as necessarily identical in every adjustment detail. Digital Realty’s October 9 Form 8-K
What did Digital Realty acquire?
Telx provided colocation, interconnection and cloud-enablement services. In July 2015, Digital Realty described Telx as managing 1.3 million square feet of data-center space across 20 facilities, with more than 52,000 network connections. The 1.3 million-square-foot figure was reported as of March 31, 2015. Digital Realty’s July 14 announcement
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The completion filing said Telx operated 20 facilities across 13 North American metropolitan areas. The announcement named New York/New Jersey, Chicago, Dallas, Los Angeles, San Francisco, Santa Clara, Seattle, Portland, Atlanta, Miami, Phoenix and Charlotte. These figures describe Telx’s footprint at the time of the 2015 transaction, not its present-day operations.
The companies already had a landlord-customer relationship. In the July announcement, Digital Realty said 11 of Telx’s 20 facilities were leased from Digital Realty, one was partly subleased from Digital Realty and a third party, two were Telx-owned, and six were leased from other third parties. The completion filing characterized more than half of Telx’s facilities as leased from Digital Realty and said Telx had been its customer for over eight years. July announcement; October completion filing
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How was the acquisition funded?
Digital Realty paid cash and described multiple funding sources in its October 2015 Form 8-K. The filing identifies proceeds from a preferred-stock offering, private placements of notes and a common-stock forward-sale settlement. It does not support attributing the entire purchase price to any one of these sources.
- Preferred stock: A public offering of 10 million shares of 6.350% Series I cumulative redeemable preferred stock was completed on August 24, 2015.
- Notes: Private placements of $500 million of 3.400% notes due 2020 and $450 million of 4.750% notes due 2025 were completed on October 1, 2015.
- Common stock: The company settled forward-sale agreements on October 8, 2015, reporting approximately $674.1 million in net proceeds.
The July announcement also mentioned a committed $1.85 billion bridge facility as a contingency. That commitment should not be mistaken for evidence that Digital Realty drew the facility to pay for the acquisition; the completion filing identifies the funding sources used. October 9 Form 8-K; July 14 announcement
Why did Digital Realty say it wanted Telx?
Digital Realty presented the deal as a way to broaden its colocation business and give customers access to Telx’s interconnection platform. CEO A. William Stein said the transaction was intended to strengthen and diversify Digital Realty’s data-center portfolio and expand its product mix and presence in colocation and interconnection. Telx CEO Chris Downie described joining Digital Realty as becoming part of a larger global data-center services platform. July 14 announcement
Those statements explain management’s rationale, not independently verified post-acquisition results. The announcement’s forecasts—including an expected doubling of Digital Realty’s colocation footprint and expected accretion to 2016 financial metrics—were projections made in July 2015, not proof of outcomes.
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