Digital Realty to acquire 55% of South African data company, Teraco for $3bn

American real estate investment trust, Digital Realty, has agreed to acquire a majority stake in South African data centre and interconnection solutions provider, Teraco Data Environments. This is according to a statement made available by Teraco.

After the deal which is expected to be closed in the first half of 2022, Digital Realty will own approximately 55% of the total equity interests in Teraco, while the remaining 45% will be held by a consortium of existing shareholders, including management, Berkshire Partners LLC, Permira, van Rooyen Group, Columbia Capital, Stepstone Ventures and the Teraco Connect Trust. 

According to the Teraco statement, Digital Realty entered into a definitive agreement to acquire a majority stake in Teraco from a consortium of investors, including Berkshire Partners and Permira.

Teraco also says the transaction will result in a powerful combination providing Teraco continued access to capital to grow. And being backed by a global leader like Digital Realty will enable Teraco to access skills and knowledge from the Digital Realty global platform and continue to grow the Teraco ecosystem.

CEO of Teraco, Jan Hnizdo says the company is excited to enter into its next chapter by joining forces with Digital Realty to create a truly global, scaled platform serving our customers in Africa and beyond.

“Our combined platform will be uniquely positioned to serve the full customer spectrum with the ability to support their growth around the world.  We look forward to working with the Digital Realty team to extend our state-of-the-art data centre and connectivity solutions to capitalise on the favourable industry trends and tremendous market opportunity.”

Deal valued a reported $3 billion dwarfs MainOne’s acquisition

The latest development comes just a month after leading Nigerian and West African cable and data centre service provider, MainOne was acquired by American internet company, Equinix. Just like Equinix, this acquisition also signals Digital Realty’s entry into the African telecoms and data space.

According to Bloomberg, this latest deal values Teraco at $3 billion and the majority stake to be acquired could cost the San Francisco-based Digital Realty about $3 billion. MainOne, however, was fully acquired by Equinix for $320 million, a valuation many analysts considered to be too low.

People are asking me if MainOne’s valuation is too low so I thought to share what I think. First off, ignore the idea of valuation you have in your head because of all the unicorns we have seen in the last few months.

— Ayobami (@BaldieBam) December 7, 2021

However, Teraco has been described as Africa’s largest data centre service provider by a mile. Based in Johannesburg and established in 2008, the company says it operates seven high-quality facilities with 75 megawatts of critical power load, serving more than 600 clients, including global Internet companies, across six core ecosystems – connectivity providers, managed service providers, cloud, content, enterprise and financial services.

Boasting more than 22,000 interconnects, Teraco’s data centres are the most interconnected facilities in Africa, allowing clients to connect directly to each other. This is why Digital Realty CEO A. William Stein believes this deal is highly strategic as it will enhance the company’s ability to serve customers on a global basis.

This highly strategic transaction immediately cements Digital Realty as the leading colocation provider in Africa, a region experiencing rapid digital transformation. Teraco is the industry leader in South Africa and the continent’s connectivity hub. Teraco will also advance our strategy of increasing exposure to highly connected, network- and carrier-dense facilities to enhance our global coverage and connectivity capabilities.” 

William Stein, CEO Digital Realty

The Teraco management team will remain in place and maintain day-to-day responsibility for operations in South Africa. Teraco’s existing investors are rolling forward a significant portion of their equity interests.