Digital Realty plans to buy Brazilian data center provider Ascenty for $1.8 billion. The move will increase Digital Realty’s hyperscale cloud customers as the global data center giant battles Equinix for colocation market share.
Under the agreement, Digital Realty’s Brazilian subsidiary, Stellar Participações, will acquire Ascenty from private equity firm Great Hill Partners. The deal is expected to close in the fourth quarter.
Why Hyperscalers Matter
By scooping up Ascenty, Digital Realty also picks up hyperscale cloud providers, which make up the bulk of Ascenty’s customer base. Having cloud giants as customers, in turn, makes Digital Realty’s colocation services more attractive to enterprise customers because it allows them to interconnect to these cloud service providers, establishing private, direct connections that bypass the public internet. This provides greater security, and it also reduces enterprises’ cloud costs.
“Enterprises are pushing more of their data center operations into colocation facilities and are also aggressively driving more workloads onto the public cloud, where cloud providers themselves use a lot of colocation facilities,” said John Dinsdale, chief analyst and research director at Synergy Research Group. “Satisfying the needs of those enterprises and cloud providers often requires a large and widely distributed data center footprint.”
Dinsdale also noted that the colocation market has seen $42 billion in data center merger and acquisition deals over the last 36 months with Equinix and Digital Realty accounting for half of the total. “There are good reasons why those two are the leading players in the colocation market,” he said.
Equinix forecasts that interconnection bandwidth will grow to 8,200-plus Terabits per second (Tb/s) of capacity by 2021 — 10 times the projected capacity of internet traffic. And as part of its strategy to attract more cloud providers to its facilities, the data center company formed a hyperscale infrastructure team, or HIT, to build data centers expressly for hyperscale cloud providers. Its first such dedicated facility is slated to open in the first quarter of 2019.
Growing Data Center Footprint
In addition to its hyperscale tenants, Ascenty’s location made it an attractive target. Digital Realty already has data centers in North America, Europe, Asia, and Australia. This expands the company’s footprint to Latin American — a region that represents an opportunity for future data center growth, said Digital Realty CEO Bill Stein in a statement.
“This transformative transaction represents consistent execution against the new market strategy we articulated at our Investor Day last December and immediately establishes us as a market leader within an historically under-served region poised for rapid growth,” Stein said.
VA Land Grab
In a separate deal also announced today, Digital Realty reached an agreement to acquire 424 acres of undeveloped land in Loudoun County, Virginia for $236.5 million. The site is adjacent to Washington Dulles International Airport and located near bulk transmission lines as well as a major fiber path. It is also located less than four miles from Digital Realty’s existing data center campuses in Ashburn, Virginia.
Stein said the land purchase will advance his company’s Connected Campus strategy. This is Digital Realty’s plan to provide connectivity options including interconnections between partners, customers, and service providers with connectivity to Internet gateways and cloud services.
“We are pleased to expand our footprint and strengthen our position in Northern Virginia, the largest and most important data center market in the world,” Stein said in a statement. “Customers are looking for long-term commitment, along with the flexibility to support their deployments and connection nodes, as well as the ability to land and expand within the same location — all of which align perfectly with our Connected Campus strategy.”