Equinix and GIC Agree to Form Joint Venture to Develop and Operate Hyperscale Data Centers in Europe
For years, hyperscale operators, including
As hyperscale companies scale their operations at
While not a broader entry into the wholesale market, xScale data centers will focus on a targeted group of hyperscale companies that offer significant value to the existing
Equinixhas deep relationships with the top global hyperscale companies. These companies benefit from the unique value of Platform Equinix, including access to business ecosystems, interconnection services and local market knowledge. Currently, global deployments from the top hyperscale companies exceed $500 millionin annual revenue at Equinix, with interconnection-rich retail deployments representing the most rapid growth segment of their deployments.
- xScale data centers will provide hyperscale companies a differentiated value proposition from existing wholesale data center operators in two key areas:
- xScale data centers will offer access to
Equinix'scomprehensive suite of interconnection and edge services. These services will tie into the hyperscale companies' existing access points at Equinix, thereby increasing the speed of connectivity to their existing and future enterprise customers.
- xScale data centers will be engineered to meet the technical and operational requirements and price points of core hyperscale workload deployments. This enables hyperscale companies to consolidate core and access point deployments into one global provider to streamline and simplify their rapid growth.
- xScale data centers will be managed and staffed by
Equinixwhile ensuring seamless connectivity to the Equinixglobal platform, providing a consistent experience for the hyperscale companies.
- Private connectivity between enterprises, strategic cloud service providers and network services is essential as digital transformation fuels higher demand for localized digital services at the edge. According to the Global Interconnection Index Volume 2, a market study published by
Equinix, the capacity for private data exchange between enterprises and cloud and network service providers is forecast to grow nearly 10 times faster than public internet traffic by 2021.
- Under the terms of the agreement, GIC will own an 80% equity interest in the joint venture and
Equinixwill own the remaining 20% equity interest. The joint venture is expected to close in Q3 2019, pending regulatory approval and other closing conditions. Equinixwill sell both its LondonLD10 (retaining part of that business under a lease back) and ParisPA8 IBX data centers and the associated leases, as well as certain other development interests, to the joint venture. A significant portion of LondonLD10 and ParisPA8 are already leased. Under the terms of this joint venture, additional new xScale data centers are expected to be developed in Amsterdam, Frankfurt(two sites) and London. These initial six facilities, when fully built out, will provide approximately 155 megawatts (MW) of power capacity.
- Upon closing of this initial joint venture, GIC is expected to have contributed cash to fund its 80% equity interest in the joint venture, and
Equinixis expected to have transferred its LD10 and PA8 IBX assets and certain development investments in return for net cash proceeds and a 20% equity interest in the joint venture. At a future date, pending the delivery of certain contractual milestones related to the four development sites, Equinixwill receive additional cash funded through additional equity contributions.
- Depending on the closing date of the joint venture, relative to prior
Equinixguidance, as announced on Form 8-K filed on May 1, 2019, the sale of both LD10 and PA8 to the joint venture is expected to reduce each of Equinix's2019 revenue, adjusted EBITDA and AFFO guidance by approximately $15 millionor less, net of the fees earned and the lease payments incurred from the joint venture by Equinix.
- The joint venture has received financing commitments for €850 million of secured credit facilities, consisting of a €200 million secured term loan facility that will be used to fund a portion of the consideration paid to
Equinixfor the sale to the joint venture of the LD10 and PA8 IBX data centers and other development investments; a €610 million secured delayed draw term loan facility that will be used to fund a portion of the planned development and construction costs for the new xScale data centers in Amsterdam, Frankfurtand London; and a €40 million secured revolving credit facility that will be used to fund working capital needs and other general corporate purposes of the joint venture. Deutsche Bankand ING Bank N.V.are acting as underwriters, joint-mandated lead arrangers and joint bookrunners for the facilities, the availability of which is subject to customary closing conditions.
- Citi served as exclusive financial advisor to
Equinixin connection with this transaction.
Kelly Morgan, Vice President – Datacenter Infrastructure & Services, 451 Research:
"As hyperscale companies expand around the world, they will increasingly look to partners to provide both broad global scale and deep local knowledge when deploying data center space.
Equinix, with its track record of operational reliability, along with expertise in financing, permitting and building data centers globally, is an example of a partner that can provide a platform for top hyperscale companies to scale core workload operations as well as interconnected access points within an ecosystem of partners and customers. By increasing the number of hyperscale facilities in the EMEA region, the joint venture between Equinixand GIC aims to accelerate the adoption of hybrid and multicloud as the IT architecture of choice by companies throughout the region." Charles Meyers, President and CEO, Equinix:
"It has been a long journey to reach this point, but we are tremendously excited to announce the formation of our first xScale data centers joint venture. Partnering with a world-class investment partner like GIC will provide the opportunity to make significant capital investments in order to capture targeted large-footprint deployments while continuing to optimize our capital structure. The JV structure will enable us to extend our cloud leadership while providing significant value to a critical set of hyperscale customers. We look forward to launching similar JVs in other operating regions and believe that these efforts will continue to further differentiate
Equinixas the trusted center of a cloud-first world."
Equinixand GIC Launch Hyperscale Joint Venture [blog]
- Learn more about Platform Equinix [website]
- Global Interconnection Index Volume 2 [market study]
This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, risks related to
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