Digital Realty Acquires DuPont Fabros for $7.6B
Digital Realty has struck a deal to acquire DuPont Fabros for $7.6 billion, consolidating its position in the hyperscale data center market. The transaction underscores the high value placed on the hard assets and long-term, inflation-linked leases common in the data center industry.
- The all-stock transaction valued DuPont Fabros at an enterprise value of approximately $7.6 billion, which included the assumption of $1.6 billion in debt. DuPont Fabros shareholders received a fixed exchange ratio of 0.545 Digital Realty shares for each share they held, representing a 14.9% premium over the closing price on June 8, 2017. - The deal was immediately accretive to Digital Realty's financial metrics and was expected to generate approximately $18 million in annualized overhead savings. The combined company was projected to have the highest EBITDA margin of any publicly-traded data center REIT in the U.S. - A key strategic driver was the acquisition of DuPont Fabros's six data center development projects, which were already 48% pre-leased and represented a planned investment of about $750 million. These projects were located in key markets like Ashburn, Chicago, and Santa Clara, where Digital Realty already had a presence. - The acquisition significantly expanded Digital Realty's ability to serve hyperscale cloud clients like Microsoft and Facebook, who were major tenants of DuPont Fabros. Post-merger, the combined company's top three customers accounted for about 18% of revenue, a significant diversification from DuPont Fabros's standalone concentration where the top three represented 57% of revenue. - At the time of the announcement on June 9, 2017, this was the largest M&A deal in the data center industry's history and a major contributor to what became a record year for data center transactions, with a total volume of around $20 billion. - BofA Merrill Lynch and Citigroup acted as financial advisors to Digital Realty and provided a fully committed bridge loan facility to finance the transaction if needed. The plan was to permanently refinance the assumed debt with investment-grade corporate bonds and other financings. - The merger added 12 operational, purpose-built data centers concentrated in top U.S. metro areas—Northern Virginia, Chicago, and Silicon Valley—to Digital Realty's portfolio. It also included strategic land holdings in Ashburn, Oregon, and Phoenix for future development. - A. William Stein, Digital Realty's CEO, and Christopher P. Eldredge, DuPont Fabros's CEO, both emphasized the complementary nature of the deal, which combined DuPont's strength in the wholesale, large-footprint market with Digital's global, diversified platform.
