July 14, 2016 / 11:15 AM / 2 years ago

Digital Bridge acquires data center company

(Reuters) - Digital Bridge Holdings LLC, a firm that invests and operates companies that power wireless communications, is buying DataBank Ltd, a private Dallas-based data center company, the companies said on Thursday.

Digital Bridge did not disclose how much it paid for DataBank, which is being sold by private equity firm Avista Capital Partners. A source familiar with the deal said the company, which is based in the Federal Reserve Bank Building in Dallas, was valued in the hundreds of millions of dollars.

The deal is the latest sign of consolidation in the data center sector, as U.S. businesses’ burgeoning demand for data and video is fueling a revival in fiber optic services and data storage.

Telecommunications firms such as Verizon Communications and CenturyLink Inc have been selling their data center portfolios, hoping to take advantage of the high valuation multiples through a sale to private equity firms or companies that specialize in data centers such as Equinix Inc and Digital Realty Trust Inc.

DataBank has six data centers, which it manages in Dallas, Minneapolis and Kansas City.

This marks the first acquisition by Boca Raton, Florida-based Digital Bridge of a data center company. The firm, which owns and operates telecommunications infrastructure companies, has raised more than $4 billion in debt and equity since it was founded in 2013.

Digital Bridge has previously invested in small cell tower company ExteNet Systems and Vertical Bridge, a wireless infrastructure company that has completed 50 acquisitions. The firm has said it plans to invest $500 million of equity into the U.S. data center space.

“Our ambitions are bigger than this acquisition,” Digital Bridge chief executive Marc Ganzi said in an interview. “This is a great launching pad to do more investments in data centers.”

As part of the deal, Michael Foust, founder and former CEO of Digital Realty Trust, will join the board of the company. Teachers Insurance and Annuity Association of America (TIAA), Allstate Investments and The Edgewater Funds are also investors in the deal.

By selling to Digital Bridge, Avista’s investors made a return on invested capital of 2.5 times before fees, representing a 20 percent internal rate of return since 2011 when Avista first invested in DataBank, according to a separate source familiar with the transaction.

Boutique investment bank D.H. Capital advised DataBank on the deal.

Reporting by Liana B. Baker in San Francisco; Editing by Stephen Coates and Diane Craft

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