Equinix Nears Deal to Buy Axtel's Mexico Data Centers

Michael O'Boyle and Liana Baker (Bloomberg) -- Equinix Inc. is in advanced talks to buy Mexican telecom firm Axtel SAB’s data centers for around $200 million, according to people familiar with the matter, a deal that would give the real estate investment trust a foothold for expansion in Latin America’s second-largest economy.

The Redwood City, California-based company could soon announce a deal for a majority stake in the business, said the people, who asked to not be identified because the matter isn’t public. Axtel plans to keep a minority stake, they said.

No decision has been made and the talks could fall through, they added.

Representatives from Equinix and Alfa SAB, Axtel’s parent company, didn’t immediately respond to requests for comment.

The deal would give Equinix a base in Mexico to challenge local providers such as Carlos Slim, the billionaire who controls America Movil SAB. Mexico overhauled its telecommunications regulations in 2013 to introduce more competition, but rivals including AT&T Inc. and Telefonica SA have struggled to whittle away at Slim’s dominance.

Equinix plans to aggressively expand in Mexico, using Axtel’s data centers as the foundation of its business in the country, one of the people familiar with the matter said. Equinix doesn’t have any data centers in Mexico, though it has some in Brazil and Colombia, according to its website.

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The deal would be one of only a handful of major deals announced in Mexico since President Andres Manuel Lopez Obrador won election last year and shook the confidence of investors with a series of moves, such as canceling an airport project and cutting off private investment in the energy sector.

Axtel has been selling parts of its business to focus on providing services to businesses and government clients.

Axtel has been looking for a buyer for a majority stake in its data centers since last year, Chief Executive Officer Rolando Zubrian said in a conference call in April. Its data centers, located in Queretaro and Monterrey, generate about $15 million annual earnings before interest taxes, depreciation and amortization, he said.

Equinix and other data center owners have been seeking to expand globally through acquisitions, as companies increasingly rely on third parties to manage their data. In April, the company purchased a data center business in Amsterdam for 30 million euros (34 million).

Equinix has a network of 200 data centers in 52 markets in the Americas, Europe, the Middle East, Africa and Asia-Pacific regions, according to its annual report.