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Nextdc Ltd’s landlord is selling its data centres

At the end of last year Asia Pacific Data Centre Group (ASX: AJD) offered to sell its three data centres to Nextdc Ltd (ASX: NXT) because it had the first right of refusal.

The offer was for a total of $300 million, comprising of $130 million for the Sydney data centre, $110 million for the Melbourne data centre and $60 million for the Perth data centre.

On 28 December 2017 Nextdc announced that it formally intended to reject each of the offers based on the ‘unjustifiable value’ promoted by the board.

Last night Asia Pacific Data Centre Group announced that it has entered into a 21-day exclusive due diligence period with a preferred party to purchase all of the data centres. The landlord said yesterday that it had agreed terms and exchanged non binding letters with the preferred purchaser for the sale of the portfolio.

The agreed price is $280 million, which equates to a 5% initial yield and a premium of $67.2 million, or 31.6%, to the last independent valuation.

Asia Pacific Data Centre Group said that based on the agreed price the pro-forma net tangible assets per security is estimated to be $2.20, excluding sale costs.

At this stage the agreement is non binding and subject to final contracts, securityholder approval, FIRB and other approvals so there is no guarantee that the sale will continue.

As I wrote above, Nextdc still has the first right of refusal and has 20 business days in which to exercise that right or to reject the proposal.

Foolish takeaway

As Asia Pacific Data Centre Group said, $280 million is less than $300 million but still a steep premium to the independent valuation, so I cannot foresee Nextdc wanting to take up the portfolio at this price either.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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