Introductory Note
Unless otherwise indicated or unless the context requires otherwise, all references in this report to “we,” “us,” “our,” “our company,” “the company” or “Digital Realty” refer to Digital Realty Trust, Inc., together with its consolidated subsidiaries, including Digital Realty Trust, L.P., our “operating partnership.”
Item 7.01. Regulation FD Disclosure.
On January 3, 2022, Digital Realty issued a press release announcing the Teraco Acquisition described under Item 8.01 below. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information included in this Current Report on Form 8-K under this Item 7.01 (including Exhibit 99.1) shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the company or the operating partnership under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), except as shall be expressly set forth by specific reference in such a filing.
Item 8.01. Other Events.
Pending Teraco Acquisition
On December 22, 2021, Digital Titan Proprietary Limited, a South African subsidiary of our operating partnership (“Digital Titan”), entered into definitive agreements with TDE Luxco, BPESAL V2 S.a r.l, and other sellers party thereto (collectively, the “Teraco Sellers”) to acquire a majority interest stake in TDE Investments (Pty) Ltd and its subsidiaries (“TDE Investments”), Africa’s largest carrier-neutral data center and interconnection services provider, for consideration that we currently estimate to be approximately $1.7 billion (the “Teraco Acquisition”). The consideration values the enterprise of TDE Investments and its subsidiaries at approximately $3.5 billion (before contractual purchase price adjustments, transaction expenses, taxes and potential currency fluctuations). Following the close of the Teraco Acquisition, Digital Titan will own approximately 55% of the total economic interests in TDE Investments and its subsidiaries, taken as a whole, with the remaining approximately 45% of such interests to be retained by a consortium of TDE Investments management and existing investors. The rolling equity holders in TDE Investments will have the opportunity to put their equity interests in TDE Investments to Digital Titan between 3.5-5.5 years following the closing of the Teraco Acquisition, and Digital Titan will have a right to call those equity interests between 5.5-6.5 years following the closing of the Teraco Acquisition.
The transaction is expected to be approximately 1% dilutive to our core funds from operations per share in 2022, breakeven in 2023, and accretive to financial metrics and the growth trajectory of the company thereafter. We expect the investment will be financed through a combination of proceeds from our private capital and capital recycling efforts, committed funds under an existing equity forward commitment, and other potential future financings.
The closing of the Teraco Acquisition is subject to customary closing conditions, including but not limited to the continuing accuracy of representations and warranties (subject to agreed-upon materiality standards) and material compliance with covenants in the share purchase agreement (the “Share Purchase Agreement”). In connection with the Teraco Acquisition, our operating partnership has agreed to guarantee to the Teraco Sellers payment in full of the consideration and any and all costs, expenses, fees and other amounts payable by Digital Titan under the Share Purchase Agreement.
We believe the Teraco Acquisition will immediately position Digital Realty as the leading data center provider on the high-growth African continent. TDE Investments is the largest and most densely interconnected data center platform in Africa, with an in-service portfolio of seven state-of-the-art data centers strategically located in the key South African metro areas of Johannesburg, Cape Town and Durban. The TDE Investments portfolio is comprised of 187 megawatts of total planned capacity, including 75 megawatts of capacity currently in-service, 19 megawatts of capacity under construction and 93 megawatts of potential future additional capacity. TDE Investments owns the freehold to six of its seven in-service data centers, as well as adjacent land to support the future development pipeline. TDE Investments serves over 600 customers, including more than 275 connectivity providers, over 25 cloud and content platforms and approximately 300 enterprises, with approximately 22,000 cross-connects between customers.
