What's Happening?
New Zealand's telecommunications company Spark has announced the spin-off of its data center arm, selling a 75% stake to Pacific Equity Partners (PEP), a private equity firm based in Sydney. The transaction values the new standalone platform, named 'DC Co', at approximately NZ$705 million (USD $417.5 million). Spark will receive NZ$486 million (USD $288 million) upon completion of the deal, with an additional NZ$98 million (USD $58 million) in deferred cash proceeds. Spark CEO Jolie Hodson expressed satisfaction with the agreement, highlighting PEP's strong track record in growing businesses across New Zealand and Australia. The new company plans to expand its capacity from 22-23MW to 130MW to meet increasing demands for cloud and AI workloads. This expansion will require over $1 billion in capital expenditure over the next five to seven years, with external capital and co-investment needed to fund the growth.
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Why It's Important?
The spin-off and sale of Spark's data center business to PEP is significant as it positions the new entity, DC Co, to compete directly with major hyperscalers like Microsoft and Amazon, who have also announced substantial data center investments in New Zealand. The expansion to 130MW capacity reflects the growing demand for high-performance computing and AI workloads, which are critical for technological advancements and economic growth. This move allows Spark to realize immediate value from its data center assets while retaining a 25% stake, ensuring continued participation in the market's growth. The deal underscores the strategic importance of data centers in the digital economy and highlights the role of private equity in facilitating large-scale infrastructure investments.
What's Next?
The deal is subject to customary regulatory approvals and is expected to close by the end of the year. Spark has already acquired land for development at Dairy Flat in Auckland, with plans to build out 10MW of capacity over the next 18 months and potentially expand by an additional 40MW. The full deployment of 130MW capacity has not been formally scheduled, but if achieved, DC Co will be a formidable competitor in the data center market. Stakeholders will be watching closely as Spark and PEP navigate regulatory processes and begin the expansion, which could influence future investments and partnerships in the region.
