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US datacentre company Digital Realty buys rival Telx to build out co-location business

Digital Realty doubles its size with the acquisition of rival datacentre systems supplier Telx, as consolidation in the market gathers pace

Digital Realty will buy US datacentre provider Telx for $1.89bn, as the major operators in the market consolidate their operations.

The deal is expected to double the size of Digital Realty’s colocation footprint with the 20 datacentres Telx operates in the US.

Of these sites, 12 are already leased or partially sub-leased from Digital Realty, while two are owned by Telx outright. The rest are leased from unrelated third parties.

William Stein, CEO of Digital Realty, said the fact more than half of Telx’s are already operated by the firm was key factor in its decision to buy it.

Digital Realty said it also plans to tap into Telx’s network connections, which will allow it to transmit data between communications service providers, enterprises and content providers at low latency.

“This transformative transaction is consistent with our strategy of sourcing strategic and complementary assets to strengthen and diversify Digital Realty’s datacentre portfolio and expand our product mix and presence in the attractive colocation and interconnection space,” said Stein.

“Telx’s well-established colocation and interconnection businesses provide access to two rapidly growing segments with long-standing customer relationships in top-tier metropolitan areas such as New York and Silicon Valley.”

Chris Downie, CEO of Telx, said: “We look forward to working with the Digital Realty team to extend a broader, enhanced datacentre solution to our collective customers.”

“The combination of Telx’s colocation and interconnection capabilities with Digital Realty’s expansive wholesale platform provides greater flexibility and optionality for our customers.”

While the news was officially confirmed on 14 July 2015, US credit rating firms Fitch accidentally published a detailed analysis of the deal and the likely impact it would have on Digital Realty’s financial standing.

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The statement was hastily withdrawn, but, according to the Wall Street Journal, its content resulted in Digital Realty’s stock price falling 1%, after it outlined the firm’s plans to finance the deal by issuing more stock.

Merger and acquisition (M&A) activity has started to pick up in the datacentre market of late, with Equinix setting out plans to buy rival operator Telecity Group in May 2015 for around $3.6bn.

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