The merger mania in the data center industry continued today as Peak 10 acquired ViaWest from parent company Shaw Communications in a $1.675 billion all-cash transaction.
The deal brings together two experienced regional players to create a national data center network covering 20 markets from coast to coast. Charlotte-based Peak 10 provides colocation and managed services in the Southeast, while ViaWest has built a network of data centers on the West coast.
Shaw Communications becomes the latest big telecom company to divest its data center holdings after a brief ownership tenure. Shaw bought ViaWest from Oak Hill Capital in 2014 for $1.2 billion, and thus sees a gain of $475 million in less than three years of ownership. It follows the lead of Verizon and CenturyLink, which each acquired and then sold data center companies.
Peak 10 Delivers on Expansion Plans
The acquisition reflects the growth ambitions of Peak 10 and its parent GI Partners. Last month CEO Chris Downie told Data Center Frontier that Peak 10 intended to enter new markets, and was positioned to either build or buy. It didn’t take long to deliver on that prediction.
“By joining forces, Peak 10 and ViaWest will create a leading hybrid IT infrastructure and solutions provider well-positioned to deliver significant benefits to our customers,” said Chris Downie, Chief Executive Officer of Peak 10. “This transformative transaction will expand our scale and geographic reach and we are excited to bring together two companies with cohesive operating philosophies and complementary strengths.”
Downie will be the Chief Executive Officer of the combined company, while ViaWest CEO Nancy Phillips will become the executive Chair of the Board of the combined company.
“As we contemplated strategic partnerships, we quickly concluded that Peak 10 offered a complementary footprint, shared focus on the customer, and talented team,” said Phillips. “I’m excited for our customers and employees because this combination will deliver an unparalleled customer experience and create dynamic growth opportunities.”
Now in 20 Markets
GI Partners, a private equity firm that is one of the most experienced investors in the data center business, knows ViaWest well as it was a minority investor when the company was owned by Oak Hill Capital.
“As an active investor in the IT infrastructure space for over 15 years, we are excited to bring these two growing companies together,” said David Mace, a Managing Director at GI Partners. “Peak 10 and ViaWest will be a powerful combination to support customers’ expanding data needs in domestic and international markets. We support the combined company’s commitment to service excellence and look forward to partnering with the leadership team to help drive the next phase of growth.”
The combined company’s operations will span 20 domestic and international markets including Atlanta, Austin, Charlotte, Cincinnati, Dallas, Denver, Ft. Lauderdale, Jacksonville, Las Vegas, Louisville, Minneapolis, Nashville, Phoenix, Portland, Raleigh, Richmond, Salt Lake City, Tampa, Amsterdam, and Calgary.
Data Center Trend Collision
The Peak 10-ViaWest deal reinforces several major industry trends. It continues an ongoing consolidation in the regional data center market, which has seen the acquisition of Cologix, 365 Data Centers, C7 Data Centers and now ViaWest, along with numerous deals for individual facilities in second-tier markets. For more on this trend, see our earlier stories:
- Closer to the Edge: Investors Buying Up Regional Data Centers
- Data Center Deal Action Shifts to Regional Markets
The deal also illustrates the shifting priorities for large telecom companies. From 2011 to 2014, telecom providers were focused on boosting their cloud computing operations, and acquired data center firms. Verizon just unwound most of its 2011 deal to buy Terremark, selling the core data centers to Equinix. Meanwhile, CenturyLink divested more than 50 data centers bought in its deal for Savvis, which was bought by investors to form Cyxtera.
Some of the telcos struggled to compete in the cloud business. Meanwhile, the valuations for data center assets were soaring, prompting telecoms to sell them off to fund new projects. CenturyLink used the proceeds to help fund its purchase of backbone provider Level 3, while Shaw used $325 million from its sale of ViaWest to acquire wireless spectrum from Quebecor Media that it can use to support its growing wireless business.
The transaction is anticipated to close in the third quarter of 2017, subject to customary closing conditions. DH Capital acted as financial advisor and Paul Hastings LLP acted as legal counsel to Peak 10 and GI Partners.
Having trouble keeping track of all the data center acquisitions? Check out our Data Center M&A Scorecard for a recap of all the deals thus far in 2017.