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NextDC to buy out its data centres landlord

October 8, 2018

Led by Craig Scroggie, NextDC will buy out the property trust which owns three centres it runs. Photo: Anna Kucera/Fairfax Media

Data centre operator NextDC will take over a property trust which owns three facilities it runs, ending a long-running battle with its landlord in a $232 million deal.

The deal was sealed with the acceptance of the $2 per share cash offer by 360 Capital, the majority owner of the Australia Pacific Data Centre Group property trust.

Combined with a 2┬ó┬áspecial distribution the offer effectively matches the property trust’s last recorded net tangible asset backing of $2.02.

Taking into account debt, the offer gives APDC an enterprise value of $261 million, in line with its most recent portfolio valuation.

Led by veteran fund manger Tony Pitt, 360 Capital holds a 67.3 per cent stake in the property trust which has three data centres solely occupied by NextDC in Sydney, Melbourne and Perth.

NextDC is led by Craig Scroggie and holds a 29.2 per cent of the property trust, which it spun off from its own business five years ago.

Power plays

Mr Pitt’s funds management platform and NextDC have been at loggerheads over control of the trust, since 360 Capital became the majority owner a year ago.

Although NextDC’s own takeover offer, a $1.87 per share bid, was eventually eclipsed by the $1.95 per share all cash offer from Mr Pitt’s side, Mr Scroggie managed to establish a large enough stake to block an outright buy-out by 360 Capital.

The impasse prompted a series of court battles as NextDC pursued a plan to call a shareholder meeting to wind-up the trust.

Mr Pitt meanwhile was attempting to sell the data centres. After a proposed sale to a mystery foreign buyer at $280 million evaporated in March this year, APDC offered the portfolio to NextDC at $265 million.

NextDC rejected the portfolio at that price, exercising its pre-emptive right of refusal, following earlier rejections at $300 million and $280 million.

Each side had a win in the two separate court battles – one relating to access rights to the data centres and one relating to 360 Capital’s right to vote at a shareholder meeting.

Negotiations

In a separate development this month, LHC Capital, run by Stephen Aboud and Marcus Hughes, snapped up a key stake of around 6.5 per cent in 360 Capital.

As the air cleared following the court battles, both parties began quietly talking in recent weeks, with NextDC assisted by Cadence Advisory and law firm Herbert Smith Freehills.

NextDC will require around $200 million to fund its acquisition of the 70.8 per cent of APDC it doesn’t already own, along with repayment of debt and transaction costs.

Mr Scroggie will tap existing cash reserves. NextDC’s liquidity has risen above $900 million, comprising cash reserves of more than $600 million and $300 million of undrawn senior debt facilities.

NextDC has already flagged separate plans to invest $2.25 billion in three new sites it has acquired in Sydney, Melbourne and Perth as prepares for a surge in demand for data storage.

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