Switch has acquired carrier-neutral colocation provider Data Foundry for $420 million in an all-cash transaction. The acquisition of Data Foundry strengthens Switch’s data center portfolio in Texas. It will expand the colocation provider’s portfolio to 16 operational data centers across six locations and will anchor the company’s fifth ‘Prime’ data center campus.
Headquartered in Austin, Texas, and with colocation data centers located in Austin and Houston, Data Foundry is strategically located in a rapidly growing technology hub. In addition, the transaction would provide Switch with attractive future expansion opportunities in Texas. It would complement and diversify Switch’s existing geographic footprint and revenue exposure.
The $429M acquisition is expected to close by mid-2021, subject to the satisfaction of customary closing conditions, including regulatory approval.
“We are extremely pleased to reach an agreement with Data Foundry and to announce the launch of our Fifth Prime Data Center Campus in Texas,” said Rob Roy, founder and CEO of Switch. “The Data Foundry acquisition extends Switch’s national reach and enhances our ability to serve Texas and the Central U.S. region with low latency connectivity, while also providing critical geographic and revenue diversification with robust expansion potential to accelerate long-term growth and value creation.”
Development of New Data Centers
Data Foundry’s existing colocation data center portfolio consists of four highly connected, multi-tenant facilities located in Austin and Houston. The Austin data center campus includes three current facilities with expansion capabilities up to 44 MW at full buildout.
The Houston campus has one existing data center with the ability to support 18 MW of customer power at full buildout. Switch intends to commence development on new data centers in both Austin and Houston at the end of 2021, with the first sectors available for customer deployments in 2023.
“Data Foundry is proud to partner with Rob Roy and the Switch team in this transaction that we believe will carry forward our company’s rich history of innovation in Texas,” said Carolyn and Ron Yokubaitis, co-founders of Data Foundry. “It will result in tremendous long-term benefits to our customers and all stakeholders of the combined business.”
The acquisition anchors Switch’s fifth ‘Prime’ data center campus. Switch PRIME data center campus ecosystems were intentionally created in unique locations to serve the latency zones of the United States. Switch’s PRIMES are strategically located in the most cost-effective area of each North American zone – based on lowest costs on power, connectivity, taxes, cost of living, and lowest risk from natural disasters.
The purchase price of $420 million represents approximately 19x estimated 2021 Adjusted EBITDA, including $2 million of projected run-rate cost synergies.
The transaction will be funded by Switch through a combination of cash on hand, borrowings under Switch’s fully undrawn $500 million revolving credit facility, or new debt securities.