European-based data center operators Interxion Holding N.V. and TelecityGroup plc (LSE: TCY) have signed a non-binding agreement that would see them combine in an all-share merger.
If the two parties consummate the deal, Interxion shareholders would receive 2.3386 new TelecityGroup shares per Interxion share. The merger would leave Interxion shareholders with approximately 45% of the combined company. The primary listing for the merged entities would be in London; a New York Stock Exchange listing for TelecityGroup's existing ADR program is being contemplated.
The boards of the two companies expect the proposed merger would provide customers with a number of benefits. These would include greater product and connectivity choices, expanded scale, and better landing points for access to European consumers and expanded gateways to new markets in Africa, Asia, and Eastern Europe.
TelecityGroup management expects to realize incremental EBITDA from cost synergies and enhanced growth opportunities of approximately £40 million annually. Capital expenditure synergies would result in an additional net present value of approximately £300 million. In total, TelecityGroup executives expect a net present value of the total synergies of approximately £600 million.
They also foresee enhanced access to capital markets and the opportunity of a lower cost of capital.
TelecityGroup Executive Chairman John Hughes would be chairman of the combined group, with Interxion Chairman John Baker as deputy chairman. Interxion CEO David Ruberg would be appointed CEO of the combined group for 12 months following completion of the transaction. Eric Hageman would be appointed CFO. The board of the combined group would comprise independent non-executive directors from both TelecityGroup and Interxion.
"Bringing together the assets and solutions offered by Interxion and Telecity will improve our customers' ability to realize the benefits of transitioning to the cloud," predicts Ruberg. "Together, we expect to be able to further reduce our customers' total cost of operation, help them deliver improved functionality to their customers, and deliver industry-leading quality of service."
The signing of a binding transaction agreement is subject to, among other things, satisfactory completion of mutual due diligence, approval by the two companies' boards of directors, and the negotiation of definitive transaction documentation. Interxion and TelecityGroup have agreed not to solicit or discuss alternative proposals until March 4, 2015; they expect to have signed the binding agreement by then. Completion of the merger should occur in the second half of 2015, subject to Interxion and TelecityGroup shareholder approvals and all relevant regulatory and antitrust approvals.
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