Takeover Unwanted, page-4

Singapore’s Temasek circles NextDC


Temasek has joined other parties circling the $1.7bn data centre operator NextDC.
Singapore government investment vehicle Temasek is believed to be circling takeover target NextDC, joining other parties eyeing the $1.7 billion data centre operator.
Temasek manages $US275 billion worth of assets, mostly in Asia and across various sectors. Within its portfolio is ST Telemedia, which controls data centres and would be involved in any move on NextDC.
Temasek has been an active investor in Australia, owning a stake in the property developer Australand through its investment in subsidiary Capitaland before it was offloaded in 2014.
It also owns Singapore Airlines, which invests in Virgin Australia.
The share price of NextDC has rallied in recent days on news that the sale of assets by its landlord — the NextDC spin-off Asia Pacific Data Centres — has generated interest in NextDC, with prospective buyers wanting not just the underlying assets of the data centres but their operator as well.
One name in the competition for APDC’s assets is Blackstone, and many believe it would also make sense for it to look at NextDC as well. The sticking point with Blackstone, of course, is price, given private equity investors are under greater pressure to deliver aggressive returns over the short term.
Analysts at Macquarie last month downgraded their rating on NextDC on fears that the stock was overvalued.
Shares have gained 65 per cent in the past year and NextDC has been trading at a 40 per cent premium to its peers.
But this is partly supported by its earnings growth predictions of 30 per cent over the next three years.
NextDC reported a 77 per cent lift in its annual earnings before interest, tax, depreciation and amortisation for fiscal 2017 to $49m.
Macquarie analysts caution that recent large-scale data centre demand in Melbourne was below market expectations despite strength in the Sydney market.
Meanwhile, various suitors are said to be circling NextDC. Equinix would also be a logical buyer of both the company and APDC.
The California-based company bought rival Metronode’s business and properties last year for $1.03bn in a competition in which Blackstone was the under bidder.
American groups have a strong tax incentive to buy both a data centre operator and its properties due to tax concessions on offer for owning the real estate of the business as well.
APDC has been at the centre of a prolonged takeover battle which, ironically, has seen NextDC drawn into the contest as a suitor despite spinning off the assets some time ago.
The property investor 360 Capital has a controlling stake of 67 per cent and is now forcing a liquidation of the business.
APDC owns three data centres, in Sydney, Melbourne and Perth, that house the storage operations owned by NextDC.
The real estate investment trust was listed on the ASX about four years ago.
NextDC also remains on APDC’s registry with 29.1 per cent. It has been campaigning for Tony Pitt’s bid for the $231 million company to be rejected.
It launched its own takeover bid of APDC for $1.87 a share, higher than 360 Capital’s $1.80 original offer before 360 Capital came back with a higher offer of $1.95 per security.
Shares are now around $2.