(Adds credit rating agency comment, conference call details,
share price reaction)
By Alastair Sharp
TORONTO, July 31 Shaw Communications Inc
will pay $830 million to buy U.S. data center
services provider ViaWest Inc, the Canadian media and cable
company said on Thursday, in a deal aimed at bolstering its
cloud computing credentials.
Shaw said the acquisition from ViaWest majority owner Oak
Hill Capital Partners and others would help accelerate the
development of its Canadian data center platform. The deal is
worth $1.2 billion, including the assumption of $370 million of
Shares in Shaw slipped 2 percent to C$24.75 in morning trade
on the Toronto Stock Exchange.
Shaw said that ViaWest has 27 data centers, mostly in the
U.S. Southwest, and that Shaw would keep the company in its
Denver headquarters as a stand-alone subsidiary whose expertise
can be made available to Shaw's own data management and cloud
"With the acquisition of ViaWest, Shaw gains significant
capabilities, scale and immediate expertise in the growing
marketplace" for data services for business, Chief Executive
Officer Brad Shaw said in a news release.
Earlier this year, Shaw started building its first Shaw
Business data center, due to open in the first half of 2015.
The deal likely scuttles any talk of Shaw selling itself to
Rogers Communications or taking part in a wireless
joint venture with Quebecor's Videotron, Canaccord
Genuity analyst Dvai Ghose said in a note.
He said the combination did not appear to offer much in the
way of synergy between Shaw's cable operations and ViaWest's
data centers, would be dilutive in the near term, and increases
Shaw's debt leverage.
Credit rating agency DBRS said the deal was neutral to
mildly positive for Shaw's business profile and modestly
credit-negative due to the roughly C$500 million ($460 million)
of cash and C$400 million of debt financing.
Shaw said the deal should close in September, subject to
U.S. regulatory approval. The transaction will be funded using
cash on hand and Shaw's existing credit facility, with no
material effect on Shaw's free cash flow, the company said.
ViaWest, which employs more than 350 people, has notched 15
percent compound annual growth for both revenue and earnings
before interest, taxation, depreciation and amortization, or
EBITDA, over the last three years.
It gets almost three-quarters of its revenue from what are
known as co-location services, in which a company provides floor
space, electricity and high-speed links for their customers'
ViaWest co-founder Nancy Phillips said the heavily managed
services they offer protect the business from pricing pressures
at the lower end of the market that could otherwise pinch
Shaw said ViaWest's 10 biggest customers contribute 28
percent of revenue, with most of the 1,300 total customers
paying a monthly recurring bill of $20,000 or less.
TD Securities acted as financial advisor to Shaw, with
Davies Ward Phillips & Vineberg LLP and Simpson Thacher &
Bartlett LLP as legal advisers.
RBC Capital Markets advised ViaWest, with Paul, Weiss,
Rifkind, Wharton & Garrison LLP providing legal counsel.
($1 = 1.0880 Canadian dollars)
(Additional reporting by Ashutosh Pandey in Bangalore; Editing
by Saumyadeb Chakrabarty, Nick Zieminski and Jonathan Oatis)