Digital Realty Buys Interxion for $8.4 Billion

Interxion data centerDigital Realty has acquired the Netherlands-based European data center colocation company Interxion. The transaction values Interxion at approximately $93.48 per ordinary share or approximately $8.4 billion of total enterprise value.

Interxion’s European business – currently consisting of 53 carrier- and cloud-neutral data centers in 11 European countries and 13 metro areas including Frankfurt, Amsterdam, Paris and Interxion’s Internet Gateway in Marseille – would be highly complementary to Digital Realty’s European footprint, given Digital Realty’s established presence in London and Dublin. The combination will create a leading pan-European data center presence.

Interxion has a robust pipeline of data center development projects currently under construction, with over $400 million invested to date and a total expected investment of approximately $1 billion. These projects would represent roughly a 40% expansion of Interxion’s standalone critical load capacity. According to Digital Realty and Interxion, these data center developments are significantly pre-leased and are expected to be delivered over the next 24 months, representing a “solid” pipeline of potential future growth for the combined company.

In addition, the combined data center colocation platform will maintain strategic land holdings in key growth metros across Europe, providing the potential for significant long-term development value creation.

The transaction has been approved by the boards of directors of both Digital Realty and Interxion. The transaction is expected to close in 2020 and is subject to the approval of Interxion and Digital Realty shareholders and other customary closing conditions.

Leadership, Integration and Brand Name

Digital Realty Chief Executive Officer A. William Stein will serve as CEO of the combined company. Interxion Chief Executive Officer David Ruberg will serve as the Chief Executive of the combined company’s Europe, Middle East & Africa (EMEA) business, which will be branded ‘Interxion, a Digital Realty company’ at the close of the transaction. Digital Realty EMEA Managing Director Jeffrey Tapley will work jointly with Mr. Ruberg on the integration of Interxion’s and Digital Realty’s businesses.

David Ruberg is expected to transition out of the role as Chief Executive of the EMEA business at some point within approximately one year of completion of the transaction. Mr. Ruberg will lead the combined company’s effort to organize and execute a program to identify and develop high-value communities of interest across the combined company’s platform. He would play a leadership role on certain of the combined company’s key global customer accounts, bringing to bear his longstanding relationships and thought leadership.

David Ruberg, who controls approximately 1.3% of Interxion’s outstanding ordinary shares, has entered into a tender and support agreement with Digital Realty pursuant to which he has agreed, among other things, to tender his shares in the tender offer and to vote in favor of the resolutions relating to the transaction at the Interxion extraordinary general meeting.

The board of directors of the combined company will consist of nine board members designated by Digital Realty and one board member designated by Interxion. Laurence A. Chapman, the current Chairman of the Digital Realty Board of Directors, will serve as Chairman of the Board of Directors of the combined company.

Global Cloud Platforms

Interxion’s well-established relationships with leading global cloud, digital media platform operators and multinational enterprise customers are expected to significantly bolster Digital Realty’s existing European platform.

Similarly, Digital Realty’s relationships with many of the leading cloud platform operators and global enterprises along with its access to low-cost capital will meaningfully extend the breadth of the combined company’s value proposition to a global customer base.

“This strategic and complementary transaction builds upon Digital Realty’s established foundation of serving market demand for colocation, scale and hyperscale requirements in the Americas, EMEA and Asia Pacific and leverages Interxion’s European colocation and interconnection expertise, enhancing the combined company’s capabilities to enable customers to solve for the full spectrum of data center requirements across a global platform,” said Digital Realty Chief Executive Officer A. William Stein.  “The transaction is expected to be accretive to the long-term growth trajectory of the combined organization, and to establish a global platform that we believe will significantly enhance our ability to create long-term value for customers, shareholders and employees of both companies.”

Employees

Digital Realty and Interxion believe the employees of the combined company will have expanded career opportunities based on the expectations of enhanced growth prospects for the combined company. The process of transitioning from two separate organizations to a combined global entity would be “fair, consistent, and transparent, recognizing the importance of preserving the rich cultural and country diversity within the combined business.”

“We are excited to deliver this compelling opportunity for all our stakeholders while bolstering our ability to offer a truly global platform to serve our customers’ needs,” said Interxion Chief Executive Officer David Ruberg. “As part of Digital Realty, stakeholders will have the opportunity to continue to reap the benefits of the value that we have created via the communities of interest approach in our carrier- and cloud-neutral European data center portfolio. They will also be able to participate in the value created by extending our approach across Digital Realty’s global footprint, complementary customer base and significant presence in the Americas, EMEA and Asia Pacific. We also believe our stakeholders will benefit from Digital Realty’s investment grade balance sheet and lower cost of capital. We look forward to working closely with Bill Stein and the entire Digital Realty team to consummate the transaction and combine the best of our companies to build the world’s preeminent data center provider.”

Interxion Shareholders, Tender Offer

The transaction is not subject to any financing condition. A special meeting of Digital Realty shareholders will be convened to approve the issuance of Digital Realty common stock in the transaction, in accordance with New York Stock Exchange rules. Following the close of the tender offer, in line with Dutch market practice, Digital Realty and Interxion will effectuate a corporate reorganization of Interxion and its subsidiaries, resulting in Digital Realty owning 100% of Interxion’s business and interests in Interxion’s subsidiaries.

If less than 95% of Interxion’s ordinary shares are tendered, Interxion shareholders who do not tender their shares in the tender offer will ultimately receive in the corporate reorganization the same consideration of 0.7067 shares of Digital Realty common stock for each Interxion ordinary share. If 95% or more of Interxion’s ordinary shares are tendered, Interxion shareholders who did not tender will ultimately be squeezed out in accordance with a statutory Dutch court procedure in which they will receive cash in an amount determined under Dutch law. An extraordinary general meeting of Interxion’s shareholders will be convened in connection with the tender offer to adopt, among other things, certain resolutions relating to the transaction.

BofA Securities, Credit Suisse and Morgan Stanley are acting as financial advisors and Latham & Watkins LLP and De Brauw Blackstone Westbroek N.V. are acting as legal advisors to Digital Realty. Guggenheim Securities is acting as financial advisor and rendered a fairness opinion to Interxion, and Moelis & Company also rendered a fairness opinion to Interxion. Debevoise & Plimpton LLP and Greenberg Traurig, LLP (Amsterdam) are acting as legal advisors to Interxion.

Furlow consulting