MONTREAL — In an all-cash transaction valued at $1.04 billion, BCE announced Monday it is selling 25 data centre facilities located at 13 sites to global interconnection services provider and data centre company Equinix Inc.
“This transaction reinforces Bell’s strategy to focus investment on the network infrastructure, content and services necessary to advance how Canadians connect with each other and the world. Equinix, with its expanding platform of data centres here in Canada and worldwide, is well-positioned to maximize the opportunities these facilities represent for Canadian businesses in an increasingly global and interconnected data sector,” said Mirko Bibic, president and CEO, in the news release.
The 25 Bell data centre facilities being acquired by Redwood City, Calif.-based Equinix are located at 13 sites in eight cities across Canada. (Pictured is the Bell data centre in Winnipeg.) Bell will continue to own and operate five other data centres located in its network central offices in Calgary, Halifax, Saint John, St. John’s and Toronto.
The transaction is expected to close in the second half of 2020 subject to customary closing conditions including regulatory approval.
As part of the transaction, Bell Business Markets becomes the first Equinix Platinum Partner in Canada, which will provide Bell enterprise clients with full access to the international scale of Equinix’s advanced integrated network and cloud solutions, says the release.
Equinix already operates two international business exchange (IBX) data centres in Toronto. In addition to adding new capacity in Toronto, the acquisition of Bell’s data centres will extend Equinix’s interconnection services to Vancouver, Kamloops, Calgary, Winnipeg, Ottawa, Montreal and Millidgeville, N.B., according to the Equinix news release. More than 600 Bell customers currently operating within the 13 data centre sites will become Equinix customers, with more than 500 of these representing net new customers for the company, says the release.
In a note to investors, Canaccord Genuity analyst Aravinda Galappatthige said the sale of the data centres provides Bell with greater balance sheet flexibility ahead of the 3.5GHz spectrum auction scheduled for later this year.
“We expect the divestiture to drive a ~$95M reduction in EBITDA on an annual basis, while the cash consideration (assuming minimal transaction fees and taxation) should reduce net debt by ~$1B. We expect the net impact will be a reduction of F20 year-end leverage from 2.83x to 2.75x… Importantly, the additional balance-sheet flexibility will give BCE additional dry powder to deploy in acquiring valuable 3.5GHz 5G spectrum at the auction scheduled for later this year,” Galappatthige said.
Furthermore, the BCE data centre sell-off is part of a continuing shift away from owning and operating data centres by telecom companies, according to Galappatthige. “Given the changing enterprise landscape, it appears that BCE has concluded that colocation services are no longer a differentiator to business customers and, therefore, there is less need to own them outright,” Galappatthige said.
Given that Rogers, Telus and TeraGo continue to own data centres, Galappatthige said Canaccord Genuity expects revaluation of these assets may occur as investors recognize the potential value hidden within these firms.
