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US-based Digital Reality to acquire majority stake in Teraco

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Teraco’s JB3 data centre facility is located within the Isando Campus in Ekurhuleni, east of Johannesburg.
Teraco’s JB3 data centre facility is located within the Isando Campus in Ekurhuleni, east of Johannesburg.

US-based firm Digital Reality is acquiring a majority stake in Teraco Data Environments, Africa’s carrier-neutral data centre and interconnection solutions provider.

Teraco announced today that Digital Realty, one of the largest global provider of cloud and carrier-neutral data centre, colocation and interconnection solutions, has entered into a definitive agreement to acquire a majority stake in Teraco from a consortium of investors, including Berkshire Partners and Permira.

Based in Johannesburg and established in 2008, Teraco is Africa’s largest data centre services provider.

The acquisition comes as Teraco has been making massive investments in the South African data centre market which is witnessing significant growth.

Another US-based provider of hyperscale data centres, Vantage Data Centres, recently announced the beginning of construction on its new R15 billion state‐of‐the‐art data centre campus in SA.

In 2020 at the SA Investment Conference 2020, Teraco committed to invest over R4 billion in the South African data centre space.

The company offers vendor-neutral colocation and other related services in data centres. The company operates seven facilities with 75 megawatts of critical power load, serving more than 600 clients, including global internet companies, across six core ecosystems – connectivity providers, managed service providers, cloud, content, enterprise and financial services.

Powerful combination

According to Teraco, with more than 22 000 interconnects, the company’s data centres are the most interconnected facilities in Africa, allowing clients to connect directly to each other, to the onramps of all major cloud providers, as well as to the continent’s largest and fastest-growing internet exchange point, NAPAfrica.

It notes that the Digital Realty transaction will result in a powerful combination providing Teraco continued access to capital to grow.

The Teraco and NAPAfrica brands will continue, the company notes.

It believes being backed by a global leader will enable Teraco to access skills and knowledge from the Digital Realty global platform and continue to grow the Teraco ecosystem.

“We are excited to enter our next chapter by joining forces with Digital Realty to create a truly global, scaled platform serving our customers in Africa and beyond,” says Teraco chief executive officer Jan Hnizdo.

“Our combined platform will be uniquely positioned to serve the full customer spectrum with the ability to support their growth around the world. We look forward to working with the Digital Realty team to extend our state-of-the-art data centre and connectivity solutions to capitalise on the favourable industry trends and tremendous market opportunity.”

Digital Realty chief executive officer William A Stein adds: “This highly strategic transaction immediately cements Digital Realty as the leading colocation provider in Africa, a region experiencing rapid digital transformation.

“Teraco is the industry leader in South Africa and the continent’s connectivity hub. This investment will enhance our ability to serve customers on a global basis by adding significant regional scale with a premier, network-dense portfolio in South Africa’s most strategically important metro areas. Teraco will also advance our strategy of increasing exposure to highly connected, network- and carrier-dense facilities to enhance our global coverage and connectivity capabilities.”

Management to remain in place

Jan Hnizdo, CEO of Teraco.
Jan Hnizdo, CEO of Teraco.

The Teraco management team will remain in place and maintain day-to-day responsibility for operations in South Africa.

The Teraco management team is led by Hnizdo, a long-time team member who has helped drive Teraco’s significant growth over the last decade.

Hnizdo is supported by an experienced and highly qualified local management team with over 100 years of combined experience.

In addition, Teraco’s existing investors, including several leading global digital infrastructure investors with significant experience investing in Africa, are rolling forward a significant portion of their equity interests, demonstrating their conviction in Teraco’s future growth prospects.

The continuing involvement of management and the existing investors is consistent with Digital Realty’s new market entry strategy of partnering with strong local management teams and experienced regional capital partners, says the firm.

After closing, Digital Realty will own approximately 55% of the total equity interests in Teraco, while the remaining 45% will be held by a consortium of existing shareholders, including management, Berkshire Partners, Permira, van Rooyen Group, Columbia Capital, Stepstone Ventures and the Teraco Connect Trust.

According to Teraco, the transaction is expected to close in the first half of 2022 and is subject to customary closing conditions.

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