Global data center service provider Equinix Inc. (EQIX - Free Report) recently announced plans of its public offering of €750 million aggregate principal amount of senior notes. The notes are slated for maturity in 2025. The company filed for the registration under the Securities Act of 1933, which is subject to customary closing conditions.
J.P. Morgan Chase & Co. (JPM - Free Report) , Barclays plc (BCS - Free Report) and BofA Merrill Lynch are acting as book-running managers for the purpose. While Citigroup Inc. (C - Free Report) , RBC Capital Markets, Goldman Sachs & Co. and HSBC are acting as co-managers, along with certain other lenders.
Proceeds from the Offering
Equinix intends to use the entire proceeds from the aforementioned offerings in two parts. In the first part, the raised amount €430.6 million (or 512.2 million) will be used for the repayment of its 4.875% senior notes due in 2020. Further, the balanced part of the raised amount will be utilized for general corporate purposes like repayment of existing indebtedness and capital expenditures.
Factors in Favour of Equinix
Last quarter (second-quarter 2017), Equinix reported solid year-over-year improvement in revenues as well as earnings. The year-over-year improvement was primarily driven by strong booking activity, Equinix's global platform, continued enterprise momentum and the acquisition of 29 Verizon data centers. The company witnessed revenue growth across all three geographic regions and verticals.
Acquisitions have been a major contributor to growth at Equinix. The company has made several moves for expanding data center capacity in many of its key markets since 2003. In December 2016, it entered into a definitive agreement to acquire 24 data center sites, including 29 data center buildings in operation across 15 metro areas, from Verizon Communications, for a total cash consideration of $3.6 billion.
Expansion in important markets and consolidation of facilities in existing ones are important parts of Equinix's core strategy. Moreover, its recurring revenue model has provided the much-needed support to its revenue stream over the years. The company's cloud and IT service businesses are its fastest growing segments, and account for roughly one fourth of total revenues.
Further, Equinix remains positive on growing demand for data centers. To meet the rising demand for cloud services, this global interconnection and data center company is expanding its IBX data centers worldwide, and gaining popularity among tech companies looking for data management. Consequently, the company expects total addressable market for retail data centers to increase at a compound annual growth rate (CAGR) of 8% from 2013 to 2017 and reach $24.0 billion. Based on this, it projects revenue growth rate of 10% through 2017.
It is worth mentioning that, Equinix exited second-quarter 2017 with $1.068 billion in cash, cash equivalents and short-term investments. The company’s total debt principal outstanding was $9.37 billion as on Jun 30, 2017. Hence, raising funds through this public offering will be beneficial for the company.
Equinix’s share price movement has been quite encouraging. Year to date, its shares have gained 30.4%, while the industry witnessed a decline of 5.6%.
Equinix carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' 10-Minute Stock-Picking Secret
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.
Learn the secret >>