Data-centre IPO is safer proxy for tech bubble

Pccw

04/09/2019 03:35

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
    By Alec Macfarlane
    HONG KONG, Sept 4 (Reuters Breakingviews) - Data centres are
a safer proxy for the tech bubble. UK-based Global Switch could
file for a Hong Kong listing of at least $1 billion as soon as
this month, according to Refinitiv publication IFR. Rising
internet usage for everything from cloud storage to 5G requires
more server warehouses. Returns have been stronger for this type
of real estate than for other hum-drum property, too. It’s a
neat way to play the internet era for buyers with a weaker
stomach.
    Multi-tenant data centres took off after the financial
crisis, when many companies began outsourcing storage to reduce
IT budgets, and the advent of new innovations is fueling fresh
demand. Buyout firm Bain Capital and infrastructure investor
Brookfield Asset Management are among those that have been
snapping them up in Asia and the United States.
    Global Switch is next on the block. Acquired by Britain’s
billionaire Reuben brothers in 2007, it has since attracted
Chinese backers. It runs 12 data centres across Europe and Asia
Pacific and is valued at roughly 7.5 billion pounds following a
recent stake sale to Chinese steelmaker Shagang
 002075.SZ . Shares in similar U.S.-listed companies have
delivered: Equinix  EQIX.O , InterXion  INXN.N  and CyrusOne
 CONE.O  have generated total returns of 61%, 52% and 42% this
year, compared to 23% for the Dow Jones U.S. Real Estate Index. 
    There’s plenty of growth, too. Global Switch’s flash new
warehouses in Hong Kong and Singapore and a tie-up with Richard
Li’s PCCW  0008.HK  hint at the opportunity in Asia-Pacific. The
multi-tenant data centre market in that region is expected to
grow 12% annually to $28 billion by 2024, Cushman & Wakefield
reckons. That will make it significantly larger than in the
United States. 
    One big challenge in any offering will be to reassure
investors that Global Switch’s Chinese ownership is an asset
more than a liability. Australian defence officials and former
British cabinet minister Malcolm Rifkind have raised security
concerns in the past. Unrest in Hong Kong means listing in New
York, where more peers trade, could be smarter. But for
investors more comfortable with geopolitical risk than the kind
of financial uncertainty that comes with volatile tech startups,
Global Switch could be a more stable bridge to the data
revolution. 
    On Twitter https://twitter.com/AlecMac11
    
    CONTEXT NEWS
    - An investment vehicle controlled by British billionaires
David and Simon Reuben has sold a 24% stake in UK-based
data-centre operator Global Switch to a Chinese buyer in a deal
valued at 1.8 billion pounds, the company said in a statement on
Aug. 27. 
    - Chinese steelmaker Jiangsu Shagang will buy the stake from
Aldersgate Investments and become Global Switch’s biggest
shareholder with a 49.9% holding. Shagang had previously
acquired indirect stakes in the company.
    - Global Switch owns, operates and develops multi-tenanted
data centres in Europe and Asia-Pacific.
    - The company plans to file an application for a Hong Kong
listing of at least $1 billion as early as September, people
close to the deal told Refinitiv publication IFR earlier. CLSA,
Goldman Sachs and JPMorgan are acting as joint sponsors.  
    - For previous columns by the author, Reuters customers can
click on  MAC/ 
    - SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS: http://bit.ly/BVsubscribe
 

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Chinese steel maker picks additional 24% stake in Global Switch
ahead of IPO     urn:newsml:reuters.com:*:nL3N25N3NF
Press release    https://www.globalswitch.com/about-us/news/270819-24-stake-in-global-switch-acquired-by-shagang-group/
BREAKINGVIEWS - Foreign IPO tide flows back into Hong Kong   
 urn:newsml:reuters.com:*:nL3N20916I
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Una Galani and Katrina Hamlin)
 ((alec.macfarlane@thomsonreuters.com; Reuters Messaging:
alec.macfarlane.thomsonreuters.com@reuters.net))