BCE is making a major investment in the back-end infrastructure that will allow it to deliver more media services to consumers and more data services to busineses.
A high profile investor group, with BCE Inc. and the Ontario Teachers' Pension Plan, Providence Equity Partners and Madison Dearborn Partners LLC, has an agreement to acquire 100% of Canadian data centre operator Q9 Networks Inc. (Q9) for C$1.1 billion.
Expanding data centre capabilities is seen as part of an industry-wide move to cloud-computing services – which, along with broadband infrastructure and next-generation wireless networks, are part of the infrastructure that supports expanded IPTV and connected media services.
BCE’s chief executive officer George Cope has said that data centres are a key focus for its multibillion dollar investment plans for 2012, boosting both its consumer and business services.
“We’re making a significant investment in an area called cloud services, which really talks about investments that companies are making in trying to manage their data,” Cope said at the company’s annual meeting.
BCE currently operates six data centres in Canada, with plans for a seventh to open later this year.
Q9 provides outsourced data centre solutions for organizations with mission-critical IT operations, including co-location hosting, high bandwidth capacity, dedicated servers, virtual private networking (VPN) and data back-up/restore capabilities, operating eleven data centres across the country (Alberta, British Columbia and Ontario).
Q9 will continue to be headquartered in Toronto and operate as a stand-alone entity.
"This is a unique opportunity to partner with the world-class management team at Q9 and with Bell, the leading communications provider in Canada. We look forward to supporting Q9's continued growth with Bell, and adding lasting value at the company," the investor group said in a joint statement.
Under the agreement, Teachers, Providence and Madison Dearborn will contribute 70%, or C$420 million, of the equity funding and Bell will provide the remaining 30%, or C$180 million.
New debt financing by Q9, already committed, will also fund a portion of the acquisition. The transaction is expected to close before the end of 2012, subject to regulatory approval and customary closing conditions.
Existing Q9 management will continue operating the company, including Chief Executive Officer Osama Arafat and President & Chief Operating Officer Paul Sharpe, both recognized leaders in the data centre infrastructure space.
"Q9 looks forward to working with these leading private-equity firms and Canada's largest communications company, all of which have a strong track record of growing leading-edge companies like Q9," said Osama Arafat, CEO of Q9 Networks. "They recognize the value of Q9 and its team, an exceptional Canadian company dedicated to providing organizations with highly secure and reliable data centre infrastructure services."
"Q9 is a recognized leader in data centre services for business customers large and small, an ideal partner to grow our hosting and cloud-based business while leveraging our world-leading broadband network infrastructure," said Tom Little, President of Bell Business Markets. "Bell looks forward to working with our partners and to offering our national business customer base access to Q9's hosting and co-location services while delivering Bell's broadband network solutions to Q9's extensive client roster."
Bell and its consortium partners have committed to settle the Reverse Break-Fee Proceedings initiated in 2008, with terms to be finalized in advance of closing of the transaction. The break fee settlement, which will consist of non-cash consideration, will be part of the overall transaction and will be conditional upon completion of the transaction.
BMO, RBC and TD are providing debt financing for the transaction. BMO Capital Markets and TD Securities served as financial advisors to Q9. Barclays, Evercore Partners, and RBC Capital Markets are serving as financial advisors to the investor group.
With $117.1 billion in assets as of December 31, 2011, the Ontario Teachers' Pension Plan is the largest single-profession pension plan in Canada. An independent organization, it invests the pension fund's assets and administers the pensions of 300,000 active and retired teachers in Ontario.
Providence Equity Partners is a leading global private equity firm specializing in equity investments in media, communications, education, and information companies around the world. Providence is headquartered in Providence, RI with offices in New York, London, Hong Kong, Beijing, and New Delhi.
Madison Dearborn Partners, based in Chicago, is an experienced and successful private equity investment firms in the United States.