UPDATED 14:34 EDT / JUNE 09 2017

Data center giant Digital Realty buys rival DuPont Fabros for $7.6B

The data center rental business is undergoing yet another round of consolidation.

Digital Realty Trust Inc, one of the biggest players in the so-called co-location industry, today inked a deal to acquire fellow data center operator DuPont Fabros Technology Inc. for $7.6 billion. The transaction will see DuPont investors receive 0.545 Digital Realty shares for every one they sell. This represents a 15 percent premium over DuPont Fabros’ last closing price, according to Reuters.

The share-based compensation amounts to about $4.95 billion, while the rest of the price tag is accounted for by the debt that Digital Realty is taking on as part of the deal. In exchange, the company is set to gain 13 data centers along with six more facilities currently under construction. They’re spread across key U.S. metropolitan areas such as Northern Virginia, Chicago and Silicon Valley where demand for infrastructure hosting space is growing rapidly as companies expand their technology capabilities.

DuPont Fabros’ data centers will join the 145 campuses that Digital Realty already operates worldwide. Among them are eight European facilities that the company bought from Equinix Inc. last year for $874 million. The deal came as part of the latter company’s efforts to seek antitrust authorities’ approval for another transaction, its $3.8 billion purchase of British data center operator Telecity Group plc.

Equinix and Digital Realty are buying up rivals for the same basic reason. Acquiring operational or even half-completed data centers is much faster than building them from scratch, which makes it possible to expand faster. Such deals also bring new clients aboard that would otherwise be much harder to win over.

Another driver behind Digital Realty’s purchase of DuPont Fabros is a desire to achieve better economies of scale. In the acquisition announcement, the company divulged that the deal is expected to facilitate operational savings of up to $18 million per year. 

The deal is expected to close in the second half of this year. Digital Realty has secured a credit facility from Bank of America Merrill Lynch  and Citigroup Inc. to help finance the purchase.

Image: Wikimedia

A message from John Furrier, co-founder of SiliconANGLE:

Your vote of support is important to us and it helps us keep the content FREE.

One click below supports our mission to provide free, deep, and relevant content.  

Join our community on YouTube

Join the community that includes more than 15,000 #CubeAlumni experts, including Amazon.com CEO Andy Jassy, Dell Technologies founder and CEO Michael Dell, Intel CEO Pat Gelsinger, and many more luminaries and experts.

“TheCUBE is an important partner to the industry. You guys really are a part of our events and we really appreciate you coming and I know people appreciate the content you create as well” – Andy Jassy

THANK YOU