Blackstone to buy data center operator QTS in $10 bn deal

Investment firm Blackstone has agreed to buy data center operator QTS Realty Trust in an all-cash deal worth about $10 billion, Reuters reported.
Data Center M&A ActivityBlackstone Funds, the buyout firm’s infrastructure unit along with its non-traded real-estate income trust and other long-term perpetual capital vehicles, will pay $78 per share, which represents a premium of about 21 percent to QTS’ closing price on Friday.

The equity value of the deal stands at $5.37 billion, according to Reuters calculations, based on 68.9 million outstanding shares, as of April 29.

A COVID-19 pandemic-led remote working environment boosted demand for cloud services, which are reliant on data centers. QTS has more than 7 million square feet of data center space throughout North America and Europe.

The $10-billion transaction, which is expected to close in the second half of this year, includes the assumption of the data center operator’s existing debt.

The deal also includes a 40-day go-shop period, which will let QTS solicit and consider other proposals.

Jefferies and Morgan Stanley were financial advisers to QTS, while Citigroup Global Markets, Barclays, Deutsche Bank Securities and Goldman Sachs advised Blackstone.

The QTS announcement brings the value of closed and pending deals up to $23 billion, putting the year well on track to match 2020’s record-setting levels. The QTS acquisition will be the most expensive data center deal ever.

QTS has a large data center footprint, a revenue growth rate that is well above the industry average, and a strong presence in each of the top six US metro markets, which makes it a highly valuable target, John Dinsdale, chief analyst at Synergy Research Group, said.

Prior to this announcement, the biggest data center M&A deals were Digital Realty’s $8.4 billion acquisition of Interxion, Digital Realty’s $7.6 billion acquisition of DuPont Fabros, and the acquisition of Global Switch by the Jiangsu Shagang Group of China, which was eventually valued at over $8 billion in transactions that were spread over three years.

Other multi-billion acquisitions have been carried out by Equinix, Cyxterra and EQT. Other notable companies who have been serial acquirers include Colony, CyrusOne, GDS, Digital Bridge/DataBank, Iron Mountain, NTT, GI Partners, Carter Validus and Keppel.