​APDC reveals gentleman's agreement with offer to buy back NextDC's interest

Asia Pacific Data Centres has offered to buy NextDC's interest for AU$2 per share, the same price NextDC offered last month to wholly acquire the securities it doesn't already own.
Written by Asha Barbaschow, Contributor

Asia Pacific Data Centres (APDC) has gone public with a gentleman's agreement that would see NextDC sell its current interest back to APDC, as the company continues its move to sell off 100 percent of its business.

In a statement issued to the ASX on Thursday, APDC said a buyback proposal was verbally made on April 18 to NextDC CEO Craig Scroggie, who requested a written proposal.

The subsequent proposal would see APDC undertake a buyback at an offer price of AU$2 per share. The price was the same as NextDC offered APDC in March to wholly acquire the securities it doesn't already own, approximately AU$258 million.

The NextDC proposal, made in confidence, was conditional on a number of matters, APDC explained, including that 360 Capital -- the majority owner of APDC -- would not participate in the buyback.

Another condition was that NextDC be made to allow third party access to the datacentres it leases off APDC for independent valuations to be made.

Subsequently, APDC initiated proceedings in the New South Wales Supreme Court claiming NextDC was failing to comply with requests for access to the datacentres in question.

NextDC on Tuesday agreed to allow the prospective purchaser to visit the sites on the condition the prospective purchaser agreed that it would be fronting at least AU$265 million if the sale was to proceed.

"The APDC boards remain open to resolving the current matters on foot in an amicable basis," Thursday's ASX statement explains. "We encourage NextDC to engage on the proposed buyback and we remain open to resolving the current access dispute on a sensible basis."

APDC was originally created as a real estate investment trust that was responsible for the buildings and land upon which NextDC operates its business, and, under the terms of the leases, if any sale of those assets is to occur, NextDC has first right of refusal on any sale of the datacentres.

NextDC and APDC have been involved in an ongoing tussle after ownership of the latter was switched to 360 Capital in November.

NextDC has been pushing to have the real estate trust underpinning APDC wound up, stating that it is unhappy with the direction 360 Capital is taking the company under its steerage, while APDC has been looking to sell off its Australian assets for around AU$300 million.

APDC in February made NextDC a AU$280 million offer for it to acquire the three datacentres it currently leases. At the time, the property trust of APDC explained that the multimillion-dollar figure equates to a 5 percent initial yield and a premium of AU$67.2 million -- or 31.6 percent -- to the last valuation.

This followed APDC over the holiday period pitching a sale price of AU$300 million for the three datacentres to NextDC, pointing to the recent sale of Metronode to Equinix for AU$1 billion as its reasons for the valuation.

NextDC struck out at such valuations, stating that Metronode is a datacentre operator, not a real estate trust.

"APDC's reference to Metronode's assumed 4.73 percent acquisition yield is akin to one suggesting that a property landlord should trade on the same capitalisation rate or multiple as its tenant be they BHP or Google," Scroggie said at the time.

"This has no logic and is simply incorrect."

NextDC reported a 32 percent boost in revenue for the first half of its 2018 fiscal year, experiencing a jump from AU$58.7 million last year to AU$77.5 million for the six months ended December 31, 2017.

Underlying earnings before interest, tax, depreciation, and amortisation for the six-month period was AU$33.6 million.


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