DigitalBridge Group, today announced the acquisition of PCCW Ltd’s data centers in Hong Kong and Malaysia, by purchasing the entity DC HoldCo, through Digital Colony Partners II, its second flagship private equity fund, via the bidding entity PowerDC Holdco Pte Ltd, for an enterprise value of $750m (HK$5.85bn).
PCCW operates facilities at 9 data center locations in Hong Kong, Mainland China, and Malaysia. However, DigitalBridge is only acquiring the Powerbase HK (Hong Kong) and DC Malaysia (Malaysia) subsidiaries from PCCW. Check-out our breakdown of PCCW’s data center portfolio from last week here.
DigitalBridge has now officially emerged as the highest-bidder following a competitive auction process run by J.P. Morgan. Therefore, we review additional transaction details for DigitalBridge’s $750m purchase of PCCW’s Hong Kong and Malaysia data centers.
Finally, the transaction is expected to close during Q4 2021.
PCCW Data Centers – DigitalBridge Buys in Hong Kong and Malaysia
PCCW’s DC HoldCo is one of Asia-Pacific’s most prominent colocation data center businesses. The company serves global hyperscale, technology service providers, content & digital media, financial services firms, and large enterprise customers via a network of facilities based primarily in Hong Kong. Recall that Hong Kong is a major financial center and key connectivity hub for the entire Asia-Pacific region.
DigitalBridge notes that PCCW’s DC HoldCo comes with a strong development pipeline and significant expansion capacity at its existing facilities. For example, the company is in the process of developing a new facility in Tsuen Wan West, Hong Kong.
Transaction Rationale – PCCW Ltd
PCCW views the sale of its data center business to DigitalBridge as an opportunity to i) streamline its operations, ii) crystalize the value of its data centers, and iii) provide it with flexibility to allocate capital.
By selling its DC HoldCo unit, PCCW will focus on and strengthen its technology, IP development, and services. Indeed, carrier-neutral colocation services is a distinct business from the company’s HKT, Media and Solutions businesses.
Crystalize Value of Data Centers
PCCW’s DC HoldCo unit was previously operating as part of the broader PCCW Ltd business, without separately disclosed financials, operational, and growth plan details. In turn, the value of the data center business was not fully recognized by investors. By transacting with DigitalBridge, PCCW is crystallizing a gain on this sale of $180m+ (HK$1.4bn+), which unlocks value for shareholders.
As a point of reference, the consolidated net asset value of PCCW’s data center business is currently $258.3m (HK$2.0bn).
Capital Allocation Flexibility
Funding the future growth and expansion of PCCW’s data center business is capital-intensive, requiring significant investment. Overall, by divesting of the company’s DC HoldCo unit, PCCW, in its view, will be able to allocate its capital and resources more efficiently to drive growth.