Digital Realty Trust said on Monday it will acquire a majority stake in Teraco, a company based in Africa with a market value of $4 billion, as it taps into rapid growth in Africa during times of pandemic.
Data centres or physical spaces that house computers to store and process data have increased in demand as governments try to contain COVID-19. A series of multibillion-dollar deals has seen infrastructure and real estate funds enter the sector.
Digital Realty, which has more than 280 data centres around the world, said it has agreed to purchase the 55% stake in a data centre services provider based in Johannesburg from a consortium of investors that includes Berkshire Partners and Permira.
Berkshire Partners and Permira funds, as well as existing investor van Rooyen Group, will retain minority equity interests in the Company. Teraco’s current management team, including Chief Executive Officer Jan Hnizdo, will continue to lead the company and remain substantial investors.
Digital Realty’s core funds from operations (FFO) per share are expected to be dilutive by about 1% in 2022 and to be added to after 2023.
“It has been a privilege to partner with Jan and his team at Teraco,” said Drew Walker, a Principal at Berkshire Partners. “Teraco has delivered exceptional growth during these first few years of our investment, leveraging its interconnected ecosystems, ongoing investments in expansion capacity, and track record of stellar execution to strengthen its leadership position in the fast-growing Sub-Saharan African data center market. As investors in digital infrastructure businesses for nearly a quarter of a century, we’re thrilled to continue our partnership with Teraco alongside Digital Realty, who will bring significant expertise and resources to the Teraco platform.”
“Over the last seven years, Teraco has transformed itself into one of the most unique data center platforms globally. Today, Teraco combines the very rare characteristics of offering an interconnection-rich ecosystem, being Africa’s home to the Cloud, while also owning the African Internet Exchange, Napafrica. Jan and his team should be very proud of what they have achieved,” said Pierre Pozzo, a Principal at Permira. “It has been a pleasure to support the Company since our original investment in 2015, during which time earnings have multiplied by nearly 20x organically. We look forward to partnering with Digital Realty to further accelerate Sub-Saharan Africa’s digital transformation powered by Teraco.”
Companies are seeing local cloud storage as a way to cut costs by renting storage rather than building their own servers or relying on other countries, leading to rapid growth for Africa’s data centre market.
As carriers and tech companies install fibre-optic cables, data consumption on the continent is also rising. This calls for secure local data hosting.
More than 600 clients, including global internet companies, use Teraco’s data centres in Johannesburg, Durban, and Cape Town.
