Verizon Communications Inc. (NYSE:VZ) might be close to selling its data centers after roughly one year of trying to divest itself from the data center business.
A Wall Street analyst claims that the company is very close to selling the data center business to Equinix Inc (NASDAQ:EQIX). Verizon CFO Fran Shammo stated a month ago that his firm would release an update on the sale process during the third quarter earnings report. However, the company has declined to make any comments with regards to the claims that it is close to selling the cloud data centers.
“We believe a transaction involving Verizon’s co-location assets is imminent and that Equinix is the most likely acquirer,” reported Colby Synesael, an analyst at Cowen & Co.
The sale of the data center business is part of Verizon’s overall strategy of divesting from some of its businesses that do not align with its strategic plans. The sale of these businesses is also aimed at generating cash that will be used to cover some of the debt that the company accumulated when it acquired Vodafone Group Plc (ADR) (NASDAQ:VOD) in 2014. Verizon CEO Lowell McAdam has been pushing the company towards securing more growth in the Internet of Things, advertising, online video and wireless networks.
The deal is expected to involve 14 Verizon data centers, most of which the company acquired in 2011 after its acquisition of Terremark Worldwide in a deal valued at $1.4 billion. However, Verizon has been unable to compete with companies such as Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft Corporation (NASDAQ:MSFT) which are the largest cloud providers.
“Based on our channel checks, we believe the portfolio includes 14 facilities which primarily include those Verizon inherited when it bought Terremark in 2011. We estimate EQIX could pay 13 to 13.5 times EBITDA, or $3.5 billion, and believe such a transaction would be viewed as positive for Equinix and neutral to Verizon,” stated Synesael.
Verizon stock closed the latest trading session at $50.26, down by $0.01 or 0.02% compared to the value of the stock in the previous close.