Azrieli Group (TASE: AZRG) has confirmed in a notice to the Tel Aviv Stock Exchange the report by Reuters that it has signed a deal to sell Canadian company Compass Data Centers at a valuation of $5.7 billion to a consortium led by Brookfield Infrastructure Partners LP and existing investor Ontario Teachers’ Pension Plan. Azrieli Group holds 32% of the company. Its share price has jumped on the news.
The notice states: “Subject to completion of the deal, the cash flow to the company will be $880 million (NIS 32 billion). The company estimates at the time of this report that the deal, if it is completed, will have a material effect on its results. If the deal is completed and the full consideration is received, the cash flow surplus (before tax) from the company’s investment in Compass is NIS 2 billion and the estimated accounting gain (before tax) is NIS 1.3 billion.”
About an hour beforehand, Azrieli Group gave notice that it intended to make a material announcement, and trading in its shares was halted. The share price had risen by 11% up to that point today.
The acquisition of the holding on Compass Data Centers in July 2019 was Azrieli Group’s first foothold in the data centers field. Azrieli initially bought 20% of the company for $135 million, and later increased its holding to almost a third of the company.
In August 2021, Azrieli Group bought 100% of Norwegian data centers company Green Mountain, which became the goose that laid the golden eggs for Azrieli, after it won a tender by Chinese company ByteDance, which operates the TikTok app, to construct a 90 megawatt server farm in Norway at an investment of €750 million (NIS 2.8 billion).
In January this year, Azrieli completed the purchase of 100% of two British data centers companies. At the end of 2022, Azrieli Group had 17 income producing data centers assets, 14 of which were in Compass Data Centers, in the US and Canada. In the first quarter of this year, the data centers generated net operating income (NOI) of NIS 39 million. Azrieli Group itself has additional activity in data centers, and the sector is worth NIS 9.6 billion according to the company’s latest financials.
Compass Data Centers is one of the largest developers of data centers in the world. In Israel, through various sub-contractors, the company is building three server farms for Amazon Web Services, which won the Israeli government’s Nimbus cloud services tender together with Google.
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It is believed that there have been differences of opinion between Azrieli Group and Compass Data Centers’ management ever since the acquisition deal in 2019, and that Azrieli Group therefore agreed to accept the offer to purchase.
Azrieli Group chairperson Danna Azrieli said, “I am proud to announce this substantial deal. The company’s investment in Compass represented a milestone for its entry into the field, and after examining various possibilities in connection with its minority holding, we chose to realize it at an excellent return. A believe in this important growth engine, and the group will continue to deepen its activity in this sector through Green Mountain.”
Published by Globes, Israel business news – en.globes.co.il – on June 20, 2023.
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