Macquarie Group inks Applied Digital investment and funding deal in US data centre play
The group’s asset management unit has upped its exposure to the burgeoning data centre sector through an investment and funding deal worth up to $8.1bn.
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Macquarie Group’s asset management unit has upped its exposure to the burgeoning data centre sector in the United States through an investment and funding deal with Applied Digital Corporation, worth up to $US5bn ($8.1bn).
In a statement, Macquarie said funds managed by the group would invest up to $US900m in Nasdaq-listed Applied Digital’s Ellendale High Performance Computing (HPC) data centre campus.
The agreement also gives Macquarie’s asset management arm the right to invest as much as an additional $US4.1bn across Applied Digital’s future HPC data centre pipeline and the right of first refusal on all HPC project funding up to the same amount for 30 months.
Dallas Texas-based Applied Digital is a designer, builder and operator of digital infrastructure. The deal agreed with Macquarie covers a $US5bn perpetual preferred equity financing facility, with investment vehicles of funds managed by the asset management unit, for Applied Digital’s High Performance Computer division.
Macquarie’s shares dipped 0.5 per cent to $224.20 on Wednesday, as the S&P/ASX200 fell 0.2 per cent. Applied Digital’s shares climbed 10 per cent to $US8.54 on Tuesday in the US, but pared some of those gains in after-hours trading.
The strategic move by Macquarie is the asset manager and investment banking group’s latest in the fast-growing and capital hungry data centre industry.
Macquarie last year divested its stake in data centre business AirTrunk, alongside PSP Investments, in a mammoth $24bn deal to Blackstone and its Canadian partner. Macquarie’s 60 per cent holding in AirTrunk was held via its second Asia-Pacific Infrastructure Fund and banking analysts have estimated the group may reap performance fees as high as $1.3bn from the sale.
Other Macquarie investments in the sector include Netrality Data Centers in the US, Aligned Data Centers based in Texas and UK and European-focused Virtus Data Centres.
There are also direct data centre investments which sit on Macquarie’s own balance sheet.
They include an equity investment in California-based Prime Data Centers and a majority investment in pan-European platform KelvinX.
CLSA analyst Ed Henning noted Macquarie was positioning for the data centre growth thematic to continue over the medium-to-long term.
“They’ve obviously got an expertise in this sector and know it quite well,” he said.
Analysts and investors will receive a quarterly trading update from Macquarie in February, ahead of a tour of some of the group’s assets and offices in Europe, the Middle East and Africa the following month.
While demand for data centres is increasing rapidly there are, however, also concerns about their immense consumption of energy.
Macquarie Asset Management’s senior managing director Anton Moldan highlighted that Applied Digital had “a differentiated strategy with access to a unique near-term power portfolio” across North America.
“The significant progress at the Ellendale HPC campus makes this a very compelling opportunity for us as well as for potential hyperscale customers,” he said. “With our global experience as an owner and manager of data centre platforms, we see this as highly attractive opportunity to help build an industry-leading HPC data centre company well positioned in these high growth segments.”
The deal with Applied Digital sees Macquarie take a 15 per cent stake in a subsidiary of the former, through the issue of perpetual preferred equity units and common equity units, which will support the 400 megawatt build-out of the Ellendale HPC Campus, the companies said.
They expect the investment proceeds and the future project financing will be used to “complete the build out of the 400MW Ellendale HPC Campus” and repay existing bridging debt.
Applied Digital’s chairman and chief executive Wes Cummins said: “With an 85 per cent ownership stake in both existing and future HPC assets and access to a project-level preferred equity financing facility sufficient to fund our HPC project pipeline, we believe we are poised for transformative progress.
Mr Cummins also cited a Morgan Stanley report which found there could be a shortfall of about 36 gigawatts in power availability for US data centres by 2028.
“To put this into perspective, that’s equivalent to the output of around 36 nuclear power plants,” he said, noting Applied Digital believed it was “well-positioned” to capitalise on these trends.
“Our strategy has been further validated over the past year by securing strategic investments from CIM Group, NVIDIA, and now Macquarie.”
Applied Digital on Tuesday reported its fiscal second-quarter revenue climbed 51 per cent to $US63.9m, from the prior year period. The company posted a net loss of $US138.7m, however, as it booked a number of lumpy items including losses on the change in fair value of debt and on the conversion of debt.
Originally published as Macquarie Group inks Applied Digital investment and funding deal in US data centre play
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