Raiders start data-centre consolidation with bang

Goodman

05/11/2026 12:00

The author is a Reuters Breakingviews columnist.  The opinions expressed are his own.
By Antony Currie
MELBOURNE, Nov 5 (Reuters Breakingviews) - The rush to snap up beleaguered data-centre players has kicked off. On Wednesday evening Sydney time, Goodman Group GMG.AX, a A$55 billion ($39 billion) property and logistics giant, and $70 billion data-centre bigwig Digital Realty Trust DLR.N joined forces to launch a raid for some 8% of downtrodden NextDC's NXT.AX stock, in what may yet become an all-out takeover offer. 
The 45.5% premium the Australian and US stalkers put on the table screams confidence in the long-term value of their target - and at some $400 million is small change for them. It's also likely to indicate similar interest in others, including US-listed neoclouds Iren IREN.O and CoreWeave CRWV.O , whose stocks, like NextDC's, have tanked. But the history of M&A in financially challenged one-trick-pony industries suggests the rewards for buyers could be patchy.
The $5 billion Brisbane-based data-centre outfit run by Craig Scroggie has been a victim of fears about the AI build-out. That manifested in Australia with the failed IPO last month of upstart neocloud Firmus Technologies. But NextDC also succumbed to its own hubris: abysmal planning for its M3 site in Melbourne led to delays installing power after a revolt by residents; they dubbed the data centre "Mordor" and christened red-head Scroggie as the "ginger Saruman", the AFR reported.
As a result of the pushback, the company last month slashed its EBITDA forecast by a third, halted projects not already under contract and started exploring asset sales. That sparked a near-50% drop in the share price. Its chair is now leaving and Scroggie has lost his bonus.
Such routs attract opportunists. Goodman and Digital Realty are already both in data centres, but are large and, especially in Goodman's case, diversified enough to swallow smaller players like NextDC, whose fortunes are tied to securing - and servicing - debt financing. The backing of bigger parents does have advantages, not least deeper pockets and better credit ratings that can reduce borrowing needs and costs. But it doesn't always work out well. 
Take big-bank forays into specialist consumer finance firms, which fund loans with debt rather than deposits. At the start of the millennium, Citi spent $31 billion on Associates and HSBC around half that on Household Financial. Bank of America dropped $4.1 billion on mortgage lender Countrywide in 2007, after first taking a 20% stake. Those businesses cratered in the 2007-2008 financial crisis, costing the buyers billions.
Sure, data centres and lending may be totally different industries. But both rely on demand offsetting asset-liability mismatches. When that relationship collapses, the product might survive but the provider might not. Buyer beware.
     
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CONTEXT NEWS 
      The Goodman Group and Digital Realty Trust bought almost 8% of beleaguered data centre builder and operator NextDC in an aftermarket raid on November 4, the Australian Financial Review reported on November 5.
The offer of A$9.50 a share represents a 45.5% premium to the stock's closing price on November 4. The two raiders have set up an investment vehicle they jointly own to make the purchase. They were seeking up to 9.9% of the company, saying in the term sheet sent to potential sellers that they had no intention of submitting a control proposal or making a takeover bid for the company at this time but reserved the right to do so if circumstances changed, Reuters reported.
     
     

(Editing by Una Galani; Production by Eileen Soreng)
((For previous columns by the author, Reuters customers can click on CURRIE/antony.currie@thomsonreuters.com))