Digital Realty Is In Talks to Buy Teraco for Over $3 Billion

(Bloomberg) -- Digital Realty Trust Inc. said it agreed to acquire a majority stake in Teraco Data Environments Pty, Africa’s largest data-center operator, from private equity owners Permira and Berkshire Partners.

A transaction values Johannesburg-based Teraco at about $3.5 billion, Digital Reality said Monday in a statement confirming an earlier Bloomberg News report.

“As Digital Realty continues to expand globally, its pending acquisition of 55% of Teraco would trump Equinix’s entry into Africa. The move, which values Teraco at $3.5 billion and is initially dilutive to earnings, suggests Digital is more focused on becoming the dominant data-center owner in Africa following Equinix’s announced purchase of MainOne for $320 million," said Lindsay Dutch, REIT industry analyst at Bloomberg Intelligence.

Digital Realty, a San Francisco-based real estate investment trust led by Chief Executive Officer Bill Stein, has a market value of about $51 billion. It competes with other digital infrastructure REITs including Equinix Inc. and American Tower Corp., which in November struck a deal to buy data center operator CoreSite Realty Corp. 

The sector is consolidating. CyrusOne Inc. and QTS Realty Trust both agreed to be taken private in 2021. In 2020, Digital Realty completed the roughly $7 billion acquisition of InterXion, its biggest deal on record, according to data compiled by Bloomberg.

Permira first agreed to invest in Teraco in 2014. Berkshire in 2019 became the largest shareholder in Teraco after acquiring a stake from Permira.