Digital Realty has just entered into a definitive agreement to acquire a majority stake in Teraco, an African carrier-neutral colocation and data center service provider.

Teraco’s portfolio in Africa includes seven data center facilities which are located in the South African metros of Johannesburg, Cape Town and Durban. Currently, the company serves over 600 customers that comprise of more than 275 connectivity providers, 25 cloud and content platforms and approximately 300 enterprises. Teraco also hosts seven on-ramps to global cloud service providers in Johannesburg and Cape Town and currently provides direct access to seven subsea cables in Durban on the east coast and Cape Town on the southwest coast.

Based on the agreement, Digital Realty is acquiring Teraco from a consortium of investors, including Berkshire Partners and Permira, in a transaction that values Teraco at approximately $3.5 billion.  

“We are excited to enter our next chapter by joining forces with Digital Realty to create a truly global, scaled platform serving our customers in Africa and beyond.  Our combined platform will be uniquely positioned to serve the full customer spectrum with the ability to support their growth around the world.  We look forward to working with the Digital Realty team to extend our state-of-the-art data center and connectivity solutions to capitalize on the favorable industry trends and tremendous market opportunity,” said Jan Hnizdo, Chief Executive Officer of Teraco.

“This highly strategic transaction immediately cements Digital Realty as the leading colocation and interconnection provider in Africa, a region experiencing rapid digital transformation,” said Digital Realty Chief Executive Officer A. William Stein.

“Teraco is the industry leader in South Africa and the continent’s connectivity hub.  This investment will enhance our ability to serve customers on a global basis by adding significant regional scale with a premier, network-dense portfolio in South Africa’s most strategically important metros.  Teraco will also advance our strategy of increasing exposure to highly connected, network- and carrier-dense facilities to enhance our global coverage and connectivity capabilities.”  

After the close of this transaction which is slated for the first half of 2022, Digital Realty will own approximately 55% of the total equity interests in Teraco, while the remaining 45% will be held by a consortium of existing investors, including management, Berkshire Partners LLC, Permira, van Rooyen Group, Columbia Capital, Stepstone Ventures and the Teraco Connect Trust.

However, the rolling equity investors in Teraco will have the opportunity to put their interests to Digital Realty between 3.5-5.5 years after closing, while Digital Realty will have the right to call those equity interests between 5.5-6.5 years after closing.  

This acquisition deal is coming in just about 3 months after Digital Realty made its first expansion to Africa through the acquisition of Medallion Data Centres, a provider of colocation and interconnection services in Nigeria.