DigitalBridge Completes $11 Billion Acquisition of Switch

Switch is now a private company with lots of land and marquee customers. Its new owners have a track record of building data center platforms and a deep bench of investors ready to put money to work in digital infrastructure.

It's a formula for growth, positioning Switch to shift into building mode in an industry facing capacity constraints in key markets.

On Monday, DigitalBridge and IFM Investors completed their $11 billion acquisition of Switch, taking the company private in a deal that priced Switch at $34.25 per share, plus outstanding debt. It's the latest in a flurry of deals in which public data center REITs like QTS Data Centers, CyrusOne and CoreSite have been bought by large investors.

“We are excited to embark on the next chapter of Switch’s evolution in partnership with DigitalBridge and IFM Investors,” said Rob Roy, the visionary founder and Chief Executive Officer of Switch. “With their strategic expertise and financial resources, Switch is ideally positioned to meet growing customer demand for the world’s most advanced and environmentally sustainable data center infrastructure.”

Switch is one of the most distinctive players in the data center sector, and had multiple suitors prior to announcing the deal in May. As one of the leading allocators of capital in the digital infrastructure sector, DigitalBridge knows how to help data center companies scale up their operations and footprint.

"Switch, IFM Investors and DigitalBridge are ideal partners, and together we will scale Switch’s business domestically and internationally to meet the robust enterprise demand for mission-critical digital infrastructure.” said Jon Mauck, Senior Managing Director at DigitalBridge Investment Management.

Land and Power. Ready to Go

What will that look like? DigitalBridge CEO Marc Ganzi provided a preview in the company's earnings call last month, saying Switch presents a unique opportunity for growth in a constrained landscape.

"There's markets where we're having challenges," said Ganzi. "Santa Clara has no power. Everyone knows the challenges around the transmission and distribution of Dominion in Data Center Alley (in Northern Virginia). And we've got some challenges in Texas as that grid needs to be upgraded and transformed. So there are markets where power is the bottleneck. You've got to be creative and you got to think long-term.

"This was the genius of what we saw in Switch and partnering with Rob Roy," said Ganzi. "That's a business that's based on 100% renewable energy, and Rob has done a very good job acquiring big swaths of land in key markets where he's not reliant on the grid. He's gone out and he's found alternative sources of energy to navigate around that.

"Demand at Switch is up because we've solved the power issue, and we've got large amounts of land, and a lot of energy capacity," said Ganzi. "And that business, we think, will perform quite well for us."

Switch was among the earliest data center companies to commit to support its data centers with 100 percent renewable energy, partnering on a massive solar energy project and large-scale energy storage technology from Tesla. Switch has also been distinctive for its focus on diversity, with women representing more than half of its leadership team.

Those qualities made it attractive to investors like IFM, an infrastructure investor owned by a group of Australian pension funds that manages $136 billion in assets.

"Switch’s excellence in data center design and operations, along with its industry leadership in sustainability, makes the company an ideal fit for IFM Investors as we seek to deliver returns to our investors and maximize the retirement savings of the millions of working people they represent.” said Kyle Mangini, Global Head of Infrastructure at IFM Investors.

A History of Scaling Data Center Platforms

As it pursues a strategy of converged digital infrastructure spanning multiple companies, DigitalBridge is notable for its ability to quickly deploy capital and capacity. That can be seen in the rapid growth for its two data center platforms, DataBank and Vantage Data Centers, which has been driven by a combination of organic development and acquisitions.

Since becoming part of DigitalBridge in 2016, Vantage has been boosted by billions of dollars in investment, enabling it to both build and buy data centers. After unveiling a $2 billion entry into Europe in 2020, the company has entered the Asia-Pacific and African markets in 2021. Vantage has acquired 4Degrees Colocation (Canada), Etix Everywhere (Europe), Next Generation Data (Wales), Hypertec (Canada) and Agile Data Centers (Asia).
DataBank, which targets the colocation and edge computing markets, is adding capacity at existing campuses in key U.S. markets, launching 10 data center expansion projects in 2021. DataBank has also grown through acquisition, folding in the operations of C7 Data Centers (Salt Lake City), zColo and EdgePresence and a portfolio from CyrusOne.

Switch operates one of the largest cloud campuses in the world at its Las Vegas CORE Campus, where founder Rob Roy introduced pioneering concepts in high-density cooling and aisle containment, as well as custom multi-mode cooling systems. The company has added four more purpose-built campuses – the Citadel Campus in Reno, the Pyramid Campus in Grand Rapids, Michigan, the Keep Campus in Atlanta, and the Rock Campus in Austin, which includes assets acquired from Data Foundry and a new facility adjacent to the Dell headquarters.

Switch has been a pioneer in data center design, sustainability and diversity. The company initiated the shift to larger data center designs with its SUPERNAP concept, which expressed Roy’s vision of a new approach to high-density data center design.

One interesting note in Monday's announcement was Mauck's reference to international expansion for Switch. The company's primary data centers are all in the U.S., although Switch worked with partners on Supernap-branded data centers in Italy and Thailand. Markets in Europe and Asia are experiencing strong data center growth, and the Vantage example suggests DigitalBridge has the capability to execute globally.