Windstream Holdings Inc. of Little Rock on Monday announced a $575 million all-cash deal to sell its data center business to TierPoint LLC of St. Louis, a privately held data center services company.
Under terms of the deal, approved by both companies’ boards of directors, Windstream will then partner with TierPoint, allowing Windstream to continue to sell cloud computing services. Windstream said the “reciprocal strategic partnership” will allow it to focus “on its core telecom offerings” while continuing to offer data center services to enterprise customers.
The deal is set to close in two to four months pending regulatory approval.
“Data center services will remain an integral component of our enterprise service offering,” Windstream President and CEO Tony Thomas said in a news release. “We expect the divested data center business to continue its significant growth under the leadership of TierPoint, and we look forward to partnering closely with them to provide advanced data center services to our enterprise customers.”
TierPoint operates data centers in Washington, Texas, Oklahoma, Pennsylvania, Maryland, New York, Massachusetts, Connecticut and Florida. Monday’s deal will add 14 Windstream data centers — including those in Raleigh and Charlotte, North Carolina, Chicago, Little Rock and Nashville, Tennessee — to TierPoint’s portfolio.
Windstream said those centers took in $122 million in revenue and $40.8 million in adjusted operating income in the second quarter. They employ 300 people.
“This is a great strategic fit for TierPoint and our customers,” TierPoint Chairman and CEO Jerry Kent said. “Windstream Hosted Solutions and its employees have earned a reputation for providing excellent customer service and innovative enterprise-class solutions. We value these team members as a key asset in the acquisition and their expertise adds to our strength and focus on providing a superior level of customer care.”
Windstream has been expanding its data centers operation since the 2010 purchase of Hosted Solutions Acquisition of Raleigh. That $310 million deal added 12 data centers across the country — 68,000-SF of data center capacity — to Windstream’s portfolio. Since that purchase, Windstream added expanded an existing data center in Boston and added new ones in Little Rock, Nashville and McLean, Virginia.
Shares of Windstream ended Monday up 1.3 percent, or 9 cents, to $6.94 per share. Shares were trading up more than 3 percent on Tuesday.
Analysts from Merrill Lynch were optimistic about the sale. In a research note cited by MarketWatch, analysts David Barden and Joshua Frantz pointed to Windstream and TierPoint’s ongoing partnership as key.
TierPoint is led by Jerry Kent, who led a group of investors and management in a buyout of the company in 2014. At the time, the firm owned 140,000 SF of data center space, and it has since added to its portfolio through acqusitions including CxP Data Centers of Jacksonville, Florida, and Xand, which added six centers in the Northeast.
TierPoint purchased the Xand centers from ABRY Partners of Boston, a private equity firm focused on media, communications and information services companies. Windstream purchased Hosted Solutions from ABRY in 2010.
Kent is the former leader of Suddenlink Communications, which in May sold to cable company Charter.
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