DigitalBridge Group (NYSE: DBRG) today announced the equity recapitalization of its portfolio company DataBank, a retail colocation provider focused on the enterprise data center segment, which operates 65+ data centers in 27+ markets across the United States and Western Europe. Initially, Swiss Life Asset Management, through Cirrus Holdings LP, and EDF Invest will acquire 27% of the fully-diluted equity interests in DataBank for ~$1.2bn in cash from existing investors.
DataBank – Data Center Map
As of Q1 2022, DigitalBridge owned a 21.8% stake in DataBank through its balance sheet. Upon completion of the initial recapitalization, DigitalBridge will reduce its ownership interest in DataBank by 6.3%, to hold a 15.5% stake in the company.
Subsequently, further stages of DataBank’s recapitalization are expected to result in incremental new investors acquiring ownership interests in DataBank from existing investors, including DigitalBridge. As such, DigitalBridge’s ownership in DataBank is anticipated to end up below a 15.5% stake. Overall, the initial and subsequent recapitalizations are expected to close in Q4 2022.
Transaction – DigitalBridge Sell-Down in DataBank
In consideration for its 6.3% ownership sale in DataBank, DigitalBridge will receive cash proceeds of $230m, implying a pre-transaction net value of $906m, inclusive of retained net value of $676m.
Additionally, based on Q1 2022 financials, DigitalBridge’s share of Digital Operating Adjusted EBITDA for the quarter would have been reduced by $2.8m. At the same time, DigitalBridge’s total Digital Operating Investment-level debt for Q1 2022 would have been reduced by ~$119m.
Finally, the valuation reflects a 1.9x multiple of average cost basis, based on DigitalBridge’s four investments in DataBank since December 2019.
DigitalBridge’s sell-down of its stake in DataBank to a newly formed permanent capital vehicle, allows the investor to take a positive valuation mark on its entire holdings in the business, while still maintaining meaningful exposure to the next phase of DataBank’s growth, alongside new co-investors. For example, DataBank’s recent growth efforts have included:
- DataBank’s acquisition of four existing data centers in the Houston, Texas metro area for $670m from CyrusOne
- DataBank’s new two-story, 200k sqft data center development project in Ashburn, Virginia, which has the ability to scale-up to 40 megawatts of power capacity
At the same time, DigitalBridge frees up $230m in cash proceeds and ~$119m in debt capacity to fund new digital infrastructure M&A transactions.
Advisors – DigitalBridge, Swiss Life, DataBank
DigitalBridge’s Independent Transaction Committee of the Board of Directors retained PJT Partners as its financial advisor. Additionally, DigitalBridge’s legal advisor was Wachtell, Lipton, Rosen & Katz.
Swiss Life Asset Managers’ financial advisor was DH Capital. Also, Swiss Life Asset Managers’ legal advisor was Vinson & Elkins.
DataBank’s financial advisor was Goldman Sachs. Additionally, DataBank’s legal advisor was Proskauer Rose.
DataBank’s New Investors – Swiss Life and EDF Invest
Swiss Life Asset Managers, on behalf of third-party clients, has €99bn of assets under management (AUM). Together with investment mandates for Swiss Life Group, the unit’s total AUM stands at €266bn, of which €9.0bn is managed by the Infrastructure Equity Business area.
Within digital infrastructure, Swiss Life’s most recent investment was in lyntia Networks, a dark and enterprise fiber provider in Spain.
EDF Invest is the real assets fund of the French energy group EDF. Presently, EDF Invest manages around €9bn of equity.
Within digital infrastructure, EDF Invest recently acquired a minority stake in the wholesale fiber business of Norlys, the largest integrated energy and telecommunications group in Denmark.
Additionally, EDF Invest owns a minority interest in Orange Concessions, a fiber-to-the-home (FTTH) business in rural France.