Private Equity Firm PAG Eyes Cloud Assets After $2 Billion Bet

(Bloomberg) -- PAG will create a new digital infrastructure company after the Asia-focused private equity firm invested in $2 billion of assets in the space, betting on the rising demand for data storage from the region’s fast-growing technology industry.

The business will focus on the acquisition of data centers and fiber networks in Japan, Australia and other Asian markets, Kris Kumar, the operation’s newly appointed chairman, said in an interview. Hong Kong-based PAG is targeting an enterprise value for the entity of $10 billion in five to seven years through deals and organic growth, he said.

Global investors have been pouring money into Asia’s digital infrastructure, betting that the region’s tech boom will fuel demand. Underpinned by a move to 5G and mobile internet, companies and governments are boosting their cloud computing capacity. The rising competition between companies and U.S.-China geopolitical tensions have also boosted demand for data storage run by independent third parties.

“The industry is growing at a fast pace globally,” said Kumar, former regional head of Asia-Pacific for Digital Realty Trust Inc, a data center landlord with a market capitalization of more than $46 billion. “Asia is starting from a smaller base with a higher growth rate.”

Kumar is planning to hire about 15 senior executives for the company covering all markets in Asia-Pacific within six to eight months. PAG’s real estate unit, which is run mainly out of Tokyo, has invested $2 billion into the sector including in data centers in the Japanese city. The firm is discussing how to leverage those assets to build out the new company. Globally, PAG manages around $40 billion across private equity, real estate, private debt and absolute return funds.

The sector is luring other investors. Real estate private equity firm Gaw Capital Partners raised about $1.3 billion for its internet data center platform last year to work with partners in China. New York-based private equity fund Stonepeak Infrastructure Partners said last August that it was leading a $1 billion investment in an Asia data center operator.

The Asian data center market is expected to grow at about 10% to 12% annually through 2024, Structure Research estimates.