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SA's Teraco selling majority stake to Digital Realty

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US-based cloud computing provider Digital Realty is buying a controlling stake in South African data center group Teraco.

The news was announced on Tuesday and when the deal is done Digital Realty will own 55% of Teraco. 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.

In a press statement Digital Realty said the transaction values Teraco at approximately US$3.5 billion, representing a cap rate of 3.5% on projected 2022 cash net operating income of about $121 million. That means its 55% stake would be worth about $1.93 billion.

Founded in 2008, Teraco is Africa's largest data center services provider offering vendor-neutral colocation and other related services. The company operates seven data center facilities across SA metros of Johannesburg, Cape Town and Durban with 75 megawatts of critical power load and also hosts the continent's largest and fastest-growing Internet Exchange Point, NAPAfrica.

Digital Realty is a cloud and carrier-neutral data center, colocation and interconnection solutions provider and is listed on the New York Stock Exchange. Digital Realty's global data center footprint includes 280 facilities across 24 countries on six continents.

"We are excited to enter our 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," said Teraco CEO Jan Hnizdo in a statement.

Teraco CEO Jan Hnizdo. (Source: Teraco).
Teraco CEO Jan Hnizdo. (Source: Teraco).

Digital Realty CEO A. William Stein called the deal a "highly strategic transaction" in a region experiencing rapid digital transformation.

"Teraco is the industry leader in South Africa and the continent's connectivity hub. This investment will enhance our ability to serve customers on a global basis by adding significant regional scale with a premier, network-dense portfolio in South Africa's most strategically important metro areas."

"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," Stein added.

The Teraco management team will remain in place and maintain day-to-day responsibility for operations in South Africa. The Teraco and NAPAfrica brands will also continue.

The transaction is expected to close in the first half of 2022 and is subject to customary closing conditions.

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*Top image is of Teraco's JB3 data center facility, located within the Isando Campus in Ekurhuleni, east of Johannesburg, South Africa. (Source: Teraco).

— The Staff, Connecting Africa

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