InterXion options include counter-offer for Telecity
Launching a counter-bid against Equinix [EQIX: NASDAQ] for Telecity [TCY:LON] is one of several responses InterXion [NYSE:INXN] will consider, it is understood.
Equinix launched on 7 May a non-binding offer for Telecity at GBP 11.45 per share, payable in cash and stock. Telecity had already agreed to acquire InterXion through an all-share merger announced in March.
In principle InterXion has the financial capabilities to outbid Equinix's current proposal and buy Telecity, it was said. At this stage, it is not clear whether such an offer would be made using cash and stock, it is understood. However, an all-cash bid partially funded using equity would be possible.
InterXion would find it difficult to compete if Equinix made a firm offer, it was said separately. Telecity and InterXion are of similar size, it was noted, and the cash portion of any competing offer would likely have to equal Equinix’s.
InterXion will also consider whether it should accept a reduced premium for its shares tendered to Telecity, it is understood.
The existing agreement would see InterXion shareholders receive 2.3386 new TelecityGroup shares per Interxion share. TelecityGroup shareholders will own approximately 55%, and InterXion shareholders approximately 45% in the combined entity.
The exchange ratio of 2.3386 new TelecityGroup shares per Interxion share implies a 15% premium.
A third option available would be to adjust the exchange ratio offering InterXion a smaller stake in the combined entity, it was said. InterXion’s priority is to pursue its deal with Telecity, it was said. Equinix’s approach nullifies the exclusivity obligation placed on Telecity and InterXion.
Alternative bidders for InterXion include Digital Realty, which has identified the European market as a priority, it was noted. The list of potential bidders in the data centre and colocation space is limited though, it was said.
Telecity shareholders have said they are very pleased with the potential Equinix offer, a source said. The company’s share price rose from 900p per share to GBP 10.93 since the deal announcement.
There are several factors that contribute to the attractiveness of a deal with InterXion, it was said. Firstly, the combination with InterXion has known synergies, while Equinix is yet to conduct due diligence on Telecity.
Shareholders taking a three-four year view on Telecity stock may favour a combination with InterXion, it was noted.
InterXion declined to comment while Telecity could not be reached.