Equinix, Inc has an established business in Japan but it is seeking to become the fourth largest operator there in a deal worth US$280 million as it bids for Tokyo based Bit-Isle Inc. It has issued a tender offer that has already been accepted by the board and senior investors already.
Those senior shareholders include the President and CEO, Kohei Terada, Mr. Yasunobu Terada and Warehouse Terrada who represent 29.74% of the 66% of the shares that Equinix require in order to complete the purchase under Japanese corporate law. Once the threshold is passed Equinix can force through the purchase of the remaining shares.
The board backs the bid but will shareholders follow
With the share price set at JPY922, well above the current price one of JPY467 one would expect investors to leap at the offer. However shareholders that purchased shares in the first half of 2013 when the price rocketed up to a high of JPY1569 per share may be hoping to hold out for a better deal. Equinix will be hoping that there are not many shareholders in that category and with board of Bit-Isle agreeing to endorse the tender offer it is possible that the Japanese shareholders will take the proffered advice.
Equinix hopes to become a big player in Japan
Gaining a footprint in Japan has never been easy for foreign businesses and this acquisition will see Equinix catapulted to the fourth largest data centre operator in the country. It will gain the five data centres in Tokyo and one in Osaka that Bit-Isle operate effectively doubling what it already has in those cities once TY5 goes live in Q1 2016.
Japan is an important country for Equinix in the Asia Pacific region delivering the majority of its regional interconnection revenue. Costs to integrate the data centres into the Equinix ecosystem are not likely to be high as they are not geographically distant from each other.
Subsuming a respected Japanese operator and the relationships that their sales team already has with Japanese businesses will help Equinix keep customers and extend the business. Bit-Isle consistently has more than 3,800 racks live and in use by customers over the last few months and with the international strength of Equinix this number could easily grow as they become a major player in the the country.
A new data centre
Of the six data centres that Bit-Isle own, only one is more than ten years old,. The latest which was commissioned in March 2015 is a modern, green facility with capacity for 1400 racks, offers seismic protection of up to force 7 on the Richter Scale and is designated state of art.
If Equinix and the Bit Isle board manage to convince the shareholders that this is a good deal then Equinix will be happy. They are buying a strong going concern with up to date facilities and strong revenue. The deal is expected to be accretive to Equinix’s adjusted funds from operations (AFFO) per share upon close.
To fund the deal The Bank of Tokyo Mitsubishi has committed to provide a one year bridging loan, further proof that Equinix expects the market to strengthen and pay back the loan quickly on profits from the year.