Digital Realty Buys DuPont Fabros for $7.6B
June 9, 2017
Realty and DuPont Fabros have entered into a definitive agreement under
which DuPont Fabros will merge with Digital Realty in an all-stock
transaction. The consummation of the transaction is subject to customary
closing conditions, including approval by the shareholders of Digital
Realty and DuPont Fabros. Under the terms of the agreement, DuPont
Fabros shareholders will receive a fixed exchange ratio of 0.545 Digital
Realty shares per DuPont Fabros share, for a transaction valued at
approximately $7.6 billion in enterprise value.
•Enhances Ability to Serve Top U.S. Metro Areas: DuPont Fabros' portfolio is concentrated in top U.S. data center metro areas across Northern Virginia, Chicago and Silicon Valley. The transaction will help grow Digital Realty's presence in strategic, high-demand metro areas with strong growth prospects, while achieving significant diversification benefits for DuPont Fabros' shareholders from the combination with Digital Realty's existing footprint of 145 properties across 33 global metropolitan areas.
•Expands Hyper-Scale Product Offering: DuPont Fabros' 12 purpose-built, in-service data centers will significantly expand Digital Realty's hyper-scale product offering and improve its ability to meet the rapidly growing needs of cloud and cloud-like customers, in addition to enterprise customers undertaking the shift to a hybrid cloud architecture. Conversely, the transaction enables DuPont Fabros to address a broader set of customers' data center requirements, with the addition of Digital Realty's colocation and interconnection product offerings.
•Solidifies Blue-Chip Customer Base: DuPont Fabros' impressive roster of blue-chip customers will further enhance the credit quality of Digital Realty's existing customer base. On a combined basis, investment grade or equivalent customers will represent more than 50% of total revenue. The transaction also significantly reduces DuPont Fabros' customer concentration. The combined company's top three customers will account for approximately 18% of revenue compared to 57% for the top three customers of DuPont Fabros on a standalone basis.
•Development Pipeline Provides External Growth Potential: DuPont Fabros' six data center development projects currently under construction are 48% pre-leased and represent a total expected investment of approximately $750 million, and amount to roughly a 26% expansion of its standalone critical load capacity. These projects are located in Ashburn, Chicago, Santa Clara and Toronto, all metro areas where Digital Realty has an existing presence. These six projects are expected to be delivered over the next 12 months, representing a solid pipeline of future growth potential. In addition, DuPont Fabros owns strategic land holdings in Ashburn and Oregon, which will support the future delivery of up to 163 megawatts of incremental capacity, along with 56 acres of land recently acquired in Phoenix.
•Size and Scale Generate Incremental Benefits: The two companies' operating models are highly complementary, and the combined organization is expected to provide the most comprehensive product offering in the data center sector. Given the enhanced size and scale, the combined company is also expected to have the most efficient cost structure and the highest EBITDA margin of any U.S.-based publicly-traded data center REIT.
Anticipated Cost Efficiencies and Financial Benefits: The combination of
the two companies is expected to create an opportunity to realize up to
$18 million of annualized overhead savings, resulting from both
companies' complementary business operations. Upon closing, the
transaction is expected to be immediately accretive to financial
metrics, and is expected to further improve balance sheet strength.