Digital Realty Trust, Inc. (DLR - Free Report) completed its previously announced combination with InterXion. With this, Digital Realty, which is a major provider of data center, colocation and interconnection solutions, is expected to enjoy an increased presence in major European metro areas.
The transaction was completed, following the expiration of the related exchange offer last week. As part of the transaction, 70.9 million shares of InterXion, representing 92.3% of total shares outstanding, were tendered.
Non-tendering shareholders will receive shares of Digital Realty common stock (and/or cash in lieu of fractional shares of Digital Realty) in accordance with a liquidation distribution, which is generally subjected to a 15% Dutch dividend-withholding tax as less than 95% of InterXion’s total shares outstanding were acquired in the exchange offer. Furthermore, the shareholders will no longer be able to trade the shares on any stock exchange and their transferability will also be subjected to certain restrictions.
The move is expected to be accretive to the long-term growth trajectory of Digital Realty as it capitalizes on InterXion's European colocation and interconnection expertise. Interxion’s European business comprised more than 50 carrier-and cloud-neutral facilities across 11 countries and several metro areas, including Frankfurt, Amsterdam and Paris, as well as its Internet Gateway in Marseille. Interxion's European business is likely to strengthen the footprint of Digital Realty, which already has solid presence in London and Dublin.
Data-center REITs are likely to keep witnessing a market boom, with growth in cloud computing, Internet of Things (IoT) and big data as well as an increasing number of companies opting for third-party IT infrastructure. Moreover, the estimated growth rates for artificial intelligence, autonomous vehicles and virtual/augmented reality markets will remain robust over the next five to eight years, giving significant impetus for growth to data-center REITs, including Digital Realty, Equinix, Inc. (EQIX - Free Report) , CyrusOne Inc. (CONE - Free Report) and CoreSite Realty Corp. (COR - Free Report) .
Particularly, Digital Realty is banking on the robust growth prospects, with accretive acquisitions and development efforts in key locations around the world. Apart from accomplishing the combination with InterXion, the company recently announced the launch of the Clonshaugh data center in Dublin, Ireland.
Nevertheless, Digital Realty faces intense competition in the industry. Amid this, aggressive pricing pressure will also likely persist in the upcoming period. Furthermore, the company has a substantial debt burden.
Over the past year, shares of the Zacks Rank #3 (Hold) company has outperformed the industry it belongs to. In fact, its shares have gained 24% against the industry’s decline of 6.4% during the same time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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