CyrusOne Inc. has announced the signing of a definitive agreement to acquire four data center facilities and two work area recovery facilities serving the New York metropolitan area through the acquisition of Cervalis Holdings LLC, a privately-held owner and operator of data centers. When completed, the transaction will expand CyrusOne’s existing portfolio to 31 data centers across 12 distinct markets (10 cities in the U.S., London and Singapore).

“We are really excited about this transaction and expect it to create significant strategic opportunities for our customers and benefits to our stockholders. I have known Mike Boccardi and Larry DeGeorge at Cervalis for many years and have always admired the team they have assembled and the financial services focused platform they have created in the New York Metro area,” said Gary Wojtaszek, president and chief executive officer of CyrusOne. “Their focus on serving the needs of the largest financial enterprise customers in the world will be a valuable complement to CyrusOne, and we look forward to working together to continue to grow the combined business and create value for our shareholders.”

Pursuant to the terms of the definitive agreement, a subsidiary of CyrusOne will acquire Cervalis for approximately $400 million, excluding transaction-related expenses, in an all cash transaction. Simultaneously, CyrusOne has obtained financing commitments from KeyBank and intends to finance the acquisition in a manner that takes into consideration balance sheet flexibility, credit ratings impact and accretion to shareholders. The transaction is expected to close in the next 45 to 60 days, subject to the fulfillment of customary closing conditions.

When completed the transaction will add four Tier 3+ data center facilities and two standalone work area recovery facilities serving the New York metropolitan region into CyrusOne’s existing data center platform. The Cervalis Facilities currently comprise more than 500,000 gross sq ft of space, including more than 125,000 colocation square feet and over 100,000 sq ft of work area recovery space.

“We have known CyrusOne and the management team for many years and are glad that we will be able to join the companies together,” said Michael Boccardi, president and chief executive officer of Cervalis. “The combined strength will provide an opportunity to further accelerate the success we have had in the financial services industry and provide our existing customers the ability to grow outside of the New York metropolitan region into CyrusOne’s global platform.”

In 2014 Cervalis generated revenues of nearly $70 million, with approximately two-thirds being derived from colocation services, and the remainder from interconnection, managed services, and work area recovery products. Over the last five years Cervalis has grown revenue at a compound annual rate of approximately 14%. As of the end of 2014, 77% of the colocation square feet within the Cervalis Facilities was utilized. In addition to the currently available raised floor space, it currently has capacity under shell to deliver an incremental 55,000 colocation square feet.

The transaction is expected to provide additional benefits to CyrusOne, including the following:

  • Enhanced Geographic Diversification: The combination will greatly enhance CyrusOne’s geographic diversification, establishing a presence in the Northeast with the addition of a platform that includes 4 data centers in the New York metropolitan market.
  • Access to a High Quality Enterprise Customer Base: Cervalis serves approximately 220 enterprise customers, with a particular niche servicing some of the world’s largest financial institutions, including several Fortune 1000 companies. Approximately two-thirds of its fourth quarter 2014 revenue came from customers within the financial services industry.
  • Strengthened Product Portfolio: The transaction provides a set of interconnected data centers in one of the world’s largest internet hubs, further enhancing the attractiveness of CyrusOne’s National IX platform. Access to a high-end managed services offering provides a platform that can be selectively leveraged across CyrusOne’s existing customer base to accelerate growth.