NextDC proposes to acquire remaining APDC shares for AU$210m in cash

NextDC said its acquisition proposal was prompted by the potential of rival bidder 360 Capital being 'not a constructive' landlord.
Written by Tas Bindi, Contributor

NextDC has proposed to acquire remaining shares in Asia Pacific Data Centre Group (APDC), the property trust that owns three of its datacentres, at AU$1.85 per share.

The offer price is higher than the AU$1.80 proposed by rival bidder 360 Capital a day earlier.

NextDC's offer represents an 18.2 percent premium over APDC's closing share price of AU$1.565 on May 1, the day before 360 Capital acquired its initial 19.9 percent stake in the property trust for AU$1.56 a share.

The Australian-listed datacentre company has since bought an 18.6 percent stake in APDC for AU$38.2 million.

"The main reason that's prompted us to make this acquisition offer is because we were concerned about 360 Capital as a potential landlord," Rahul Badethalav, investor relations manager at NextDC, told ZDNet on Wednesday.

Badethalav added that there are some "meaningful benefits" for customers, being the datacentre operator as well as the owner of the land that sits underneath the datacentres.

The company is the sole tenant of APDC's datacentre facilities in Sydney (S1), Melbourne (M1), and Perth (P1).

"On top of that, our balance sheet also benefits from owning the land and banks are ultimately more comfortable lending against land. So ultimately our funding capacity improves as a consequence as well," Badethalav said.

Should the offer be accepted, NextDC would be paying approximately AU$210 million from its existing cash reserves and 360 Capital would walk away with more than AU$6 million in profit.

The proposal [PDF] noted that NextDC had excess liquidity of more than AU$460 million as of June 20, 2017, inclusive of cash reserves and a senior corporate debt facility.

"In 2015, we advised the market of our change in strategy to own more of our datacentre properties over the longer term when we announced that NextDC would proceed to develop and own the new datacentres for Brisbane (B2) and Melbourne (M2)," NextDC CEO, Craig Scroggie, said in a statement.

"S1, M1, and P1 are properties well known to us and represent a low risk acquisition for NextDC, which can be funded from our existing cash reserves following the successful upsizing of Notes III in May 2017."

360 Capital called for a meeting to take place on Friday to oust APDC's current management and take over leadership of the fund. The property trust withdrew the meeting about 15 minutes after NextDC submitted its proposal in order to concentrate on its due diligence.

"Our thinking is they probably didn't have the confidence that their vote was going to get accepted on Friday and ultimately to save face, they've withdrawn their proposal," Badethalav said.

360 Capital removed the caveat of replacing APDC's board of directors in its takeover proposal, which NextDC felt reflected "poor corporate governance".

NextDC believes "there is no reason" for APDC to not allow the datacentre company to start its due diligence process.

"Naturally, given our datacentres sit on the land itself, it would be a fairly straightforward transaction to make, so we do think that the offer that we made is compelling," Badethalav said.

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