UK data centre provider Telecity Group has agreed to buy Dutch rival Interxion Holding in an all-share merger deal aimed at boosting its cloud computing capabilities.
The merger, which values the two companies at more than £3 billion, is expected to help tap into booming data centre demand as a growing number enterprise businesses migrate data and digital applications to the cloud.
Interxion CEO David Rudberg will take charge of the joint company for the next 12 months, following the departure of Telecity CEO Mike Tobin last year, with the merger expected to be complete in the second half of this year. Under the terms of the agreement, Interxion shareholders will receive 2.3386 Telecity shares per Interxion share.
It is expected that combining elements of the two businesses will create around £600 million of added value through cost efficiencies and commercial opportunties.
Both companies have a substantial presence in Europe offering connected collocation and cloud services. Interxion owns 39 data centres in 11 countries across the continent, while London-based Telecity runs 37 facilities in the region.
"Bringing together the assets and solutions offered by Interxion and Telecity will improve our customers' ability to realise the benefits of transitioning to the cloud," said Interxion CEO David Ruberg.
"Together, we expect to be able to further reduce our customers' total cost of operation, help them deliver improved functionality to their customers, and deliver industry leading quality of service."
It had been rumoured that Telecity would be subject to a takeover itself following CEO Tobin's departure last year. However, TechMarketView analyst Kate Hanaghan commented that the Interxion merger will make sense "from a market perspective".
"The data centre services game is about scale and scope of product," she said. "In other words, customers want access to highly resilient data centres, with good geographical coverage for services that cover straight co-location through to complex and highly secure private clouds.
"Furthermore, demand for these services continues to rise as data and connectivity remain key to supporting enterprise growth strategies. In this context, bringing together two entities that offer similar services (but where there are opportunities for cross-selling) is a very sensible way to take advantage of that market demand. "
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