Goldman Sachs joins NextDC defence

NextDC chief executive Craig Scroggie. Picture: Mark Cranitch

It seems that NextDC is preparing itself for corporate activity on all fronts with a second investment bank turning up in its camp.

Not only has the Australian listed data centre operator hired Macquarie Capital for the competition to buy $US10bn ($14.5bn) data centre giant Global Switch, it also has investment bank Goldman Sachs in its corner.

DataRoom understands that Goldmans has been drafted in by NextDC to offer defence advice.

It comes at a time that many in the market believe a looming buyout could be a serious threat to NextDC.

The company is one of the last quality data centre operators in the world left in the listed market, with private equity and superannuation funds carrying out a flurry of acquisitions in the past year of NextDC’s global rivals.

The businesses are appealing to buyers because of their defensive nature and have offered a stable, low-risk home for large pools of funds raised by private equity and superannuation funds in the past year.

Most equity analysts in the technology space have it on its list as among the most likely companies to be subject to a buyout proposal.

NextDC’s move to land a major acquisition may be part of its defence strategy.

Macquarie is working with the company to find a financial partner for the competition to buy Global Switch, which has been for sale for about two years.

Information memorandums for the JPMorgan and UBS-run contest are now understood to be in the market.

Like most other technology stocks, NextDC shares surged during the pandemic.

Amid the market sell-off, shares in NextDC closed down 5.32 per cent on Wednesday, taking its market value to $4.64bn.

There have been four major deals in the global data centre space in the past two years, with Kohlberg Kravis Roberts and Global Infrastructure Partners buying CryusOne, American Tower buying CoreSite, Digital Realty buying Interxion and DigitalBridge last year buying Switch in the US for $US1bn.

Global Switch is owned by China’s Jiangsu Shagang and the understanding is that NextDC wants to buy the Asia-Pacific arm of the operation, which accounts for about a third of earnings.

In Australia, Global Switch owns two major data centres on the western edge of Sydney’s CBD, spread over 73,000sq m.

Major local data centre investors include Morrison & Co, which purchased Canberra Data Centres for just over $1bn in 2016, and private equity firm Brookfield, which bought Australian data centres from Blackstone in 2019.

Also in 2019, Macquarie Asset Management bought a majority stake in Sydney-based data centre company Air Trunk, in a deal that valued the business at more than $3bn.