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Business bought at approximately 19x estimated 2021 Adjusted EBITDA, including $2 million of projected run-rate cost synergies.
Founder and Editor, The Tech Capital
May 03, 2021 | 3:16 PM BST
Largescale data centres operator Switch, Inc. (NYSE: SWCH) has entered into a definitive agreement to acquire Data Foundry, Inc., a carrier-neutral colocation provider, for $420 million in an all cash transaction.
The acquisition is expected to close by mid-2021, subject to the satisfaction of customary closing conditions, including regulatory approval.
Headquartered in Austin, Texas, and with data centres in Austin and Houston, Data Foundry is located in a rapidly growing technology hub.
The transaction also lays the ground for Switch’s future expansion opportunities in Texas.
The acquisition of Data Foundry expands the Switch portfolio to 16 operational data centres across six locations and will anchor the company’s Fifth Prime data centre campus. The deal will also add over 400 customer logos.
Switch founder and CEO Rob Roy said: “We are extremely pleased to reach an agreement with Data Foundry and to announce the launch of our Fifth Prime Data Center Campus in Texas. The Data Foundry acquisition extends Switch’s national reach and enhances our ability to serve Texas and the Central US region with low latency connectivity, while also providing critical geographic and revenue diversification with robust expansion potential to accelerate long-term growth and value creation.”
Also commenting, Carolyn and Ron Yokubaitis, Co-Founders of Data Foundry, added: “Data Foundry is proud to partner with Rob Roy and the Switch team in this transaction that we believe will carry forward our company’s rich history of innovation in Texas, and will result in tremendous long-term benefits to our customers and all stakeholders of the combined business.”
Data Foundry’s existing portfolio consists of four connected, multi-tenant data centres located in Austin and Houston. The Austin campus includes three current facilities with expansion capabilities up to 44 MW at full buildout.
The Houston campus has one existing data centre with the ability to support 18 MW of customer power at full buildout. Switch intends to commence development on new data centres in both Austin and Houston at the end of 2021, with the first sectors available for customer deployments in 2023.
The purchase price of $420 million represents approximately 19x estimated 2021 Adjusted EBITDA, including $2 million of projected run-rate cost synergies.
Switch management expects the transaction to be accretive to AFFO¹ per share within its first full calendar year after closing.
The transaction will be funded through a combination of cash on hand, borrowings under Switch’s fully undrawn $500 million revolving credit facility, or new debt securities.
Switch was advised by Wells Fargo Securities, LLC and Latham & Watkins LLP on the transaction. Data Foundry was advised by DH Capital, LLC and Vinson & Elkins LLP.
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