TeleCity agrees £58m buyout

Consolidating fragmentation apparently

By Tim Richardson, 18th July 2005

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TeleCity - the UK-based colocation and data centre service provider - has agreed to a £58m buyout led by the 3i investment group.

3i and Oak Hill Investors have set up a new company - Inhoco - as a vehicle to acquire the data centre operation. The 21p a share offer represents a premium of 22 per cent on the 17.25p closing price of TeleCity on Friday.

In a statement Inhoco director Ian Nolan said: "We believe that TeleCity is a good business [and] are delighted to be partnering to help TeleCity in its further development and to position it to realise its full potential."

That "full potential" could mean trying to pair TeleCity up with another data centre or internet operator.

Why? 'Cos Inhoco recognises that that the European data centre market is "fragmented" which "restricts the ability of TeleCity to offer the level and breadth of services which its customers require and to manage the business in the most cost-efficient manner given current and expected market demand".

However, industry consolidation could beef up the business enabling it "to capitalise effectively on the continued demand from the marketplace for reliable data centre space and associated services".

Although Inhoco stressed it has "no agreements" in place at the moment, it is picking up the phone and making those all important "fancy meeting up some time for a chat" calls.

Based in London, Telecity was established in 1998 and floated on the London Stock Exchange in June 2000. It has nine centres across Europe in Amsterdam, Dublin, London, Manchester, Frankfurt, Paris and Stockholm.

In the year to December 2004 it generated £25.8m in revenues and EBITDA earnings of £1.9m. ®