What is the story about?
What's Happening?
New Zealand's telecommunications company Spark has announced the spin-off of its data center arm, selling a 75% stake to Sydney-based private equity firm Pacific Equity Partners (PEP). 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 deal will allow Spark to retain a 25% stake in DC Co, enabling continued participation in the growing data center market.
Why It's Important?
This strategic move by Spark is significant as it aligns with the increasing demand for cloud and AI workloads, which require substantial data center capacity. By partnering with PEP, Spark aims to expand DC Co's capacity from the current 22-23MW to 130MW. This expansion is crucial for meeting the rising demands of high-performance computing and AI applications. The deal also positions DC Co to compete with major players like Microsoft and Amazon, who have announced significant data center investments in New Zealand. For Spark, the transaction provides immediate financial returns while maintaining a foothold in the expanding data center market, potentially enhancing shareholder value over the long term.
What's Next?
The expansion of DC Co's capacity to 130MW will require over $1 billion in capital expenditure over the next five to seven years. Spark has already acquired land for development at a site in Auckland, with plans to build out 10MW of capacity in the next 18 months and the potential for an additional 40MW expansion. The full deployment timeline for the 130MW capacity has not been announced. The deal is subject to regulatory approval and is expected to close by the end of the year. As the expansion progresses, DC Co will likely seek further external capital and co-investment to fund its growth.
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