Digital Realty Trust, Inc. (NYSE: DLR) said June 9 it plans to acquire fellow data center REIT DuPont Fabros (NYSE: DFT) in an all-share transaction valued at approximately $7.6 billion.
The two companies said the combined organization is expected to provide the most comprehensive product offering in the data center sector.
William Stein, Digital Realty’s CEO, said the deal will create the eighth largest publicly traded REIT, with a combined equity market capitalization of $25.2 billion. During a conference call, Stein described the new company as “the home to the cloud,” noting that “we are still in the early innings of cloud adoption.”
The deal is expected to enhance Digital Realty’s ability to grow its presence in strategic, high-demand metro areas with strong growth prospects, while achieving significant diversification benefits for DuPont Fabros’ shareholders.
DuPont Fabros’ portfolio is concentrated in top U.S. data center metro areas across Northern Virginia, Chicago and Silicon Valley. Digital Realty’s portfolio includes 145 properties across 33 global metropolitan areas.
“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,” Stein said.
Meanwhile, DuPont Fabros’ roster of blue-chip customers is expected to further enhance the credit quality of Digital Realty’s existing customer base. On a combined basis, investment grade or equivalent customers will represent more than 50 percent of total revenue.
The companies also highlighted the external growth potential from development. DuPont Fabros’ six data center development projects currently under construction are expected to be delivered during the next 12 months and amount to roughly a 26 percent expansion of its standalone critical load capacity
Under the terms of the agreement, which is expected to closed in the second half of this year, DuPont Fabros shareholders will receive a fixed exchange ratio of 0.545 Digital Realty shares per DuPont Fabros share. Based on Digital Realty’s closing share price Thursday of $116.75, the offer is valued at $63.60 per share, a premium of 14.9 percent above DuPont Fabros’ closing price on Thursday of $55.36.