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Digital Realty, DuPont Fabros Plan Merger

June 15, 2017

Digital Realty and DuPont Fabros are merging in an all-stock transaction valued at $7.6 billion. The merger will create a company with the highest EBITDA margin of all the U.S.-based publicly traded data center real estate investment trusts.                              

DuPont Fabros operates large scale carrier-neutral data centers. Those multitenant facilities are concentrated in Chicago, Northern Virginia, and Silicon Valley. They will enable Digital Reality – which provides colocation, data center, and interconnection services – to grow its presence in those high demand areas.  

Digital Realty was also interested in DuPont Fabros given its roster of blue chip customers, its ample pipeline, and its strength in the hyperscale solutions marketplace. Plus the merger is expected to result in up to $18 million of annualized overhead savings and more attractive cost of capital.

“This strategic and complementary transaction significantly enhances Digital Realty's ability to support the growth of hyper-scale users in the top U.S. data center metro areas, while providing meaningful customer and geographic diversification for DuPont Fabros,” said Digital Realty CEO A. William Stein. “The combination is expected to generate both operating and financial benefits, and I'd like to congratulate Scott Peterson, Mark Walker and their team on successfully negotiating the largest transaction in our company's history, a combination that we believe will enhance our ability to create significant long-term value for both sets of shareholders.”

GoDaddy, Navient, Northwestern Medicine, and YP.com are among the customers that rely on DuPont Fabros solutions. But the company has a

Image via Pixabay

wide array of customers in a variety of industry verticals.

Following the merger, the combined company’s top three customers will account for about 18 percent of revenue. That’s compared to 57 percent for the top three customers of DuPont Fabros on a standalone basis.

DuPont Fabros is doing new builds in Ashburn, Chicago, Santa Clara, and Toronto, all of which are cities in which Digital Reality already offers services. All six of these projects are slated to go live in the next 12 months, providing opportunity for future growth, the companies say. Forty-eight percent of the new space has been preleased.

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