Colocation provider DataBank has agreed to acquire zColo, the colocation business of Zayo Group Holdings. The deal dramatically expands DataBank’s data center network, adding 44 data centers across 23 markets in the U.S. and Europe. The transaction, which combines several companies within the Colony Capital universe of companies, creates one of the largest privately-held data center operators in the U.S.

The combined companies will operate 64 data centers, with more than 3,000 customers and more than $400 million in revenue. The expanded DataBank will operate 1.1 million square feet of data center space, with 141 megawatts of installed UPS capacity. The deal boosts DataBank’s footprint from 9 markets to 29 markets, including 18 major interconnection points and over 30,000 cross connects.

“Simply put, this highly complementary acquisition will allow us to serve customers better,” said Raul Martynek, CEO of DataBank. “The strategic rationale is fully aligned with our core ‘Data Center Evolved’ strategy built around providing customers broad geographic reach as they move their content and applications closer to the edge. We look forward to integrating zColo into our portfolio while elevating our existing level of service to meet the increasingly diverse workloads of our enterprise customers.”

DataBank is a key component of Colony Capital’s plan to build digital infrastructure to support the growth of the data economy. Colony CEO Marc Ganzi said the company would continue to do strategic M&A despite the business disruptions created by the COVID-19 pandemic, and the DataBank-zColo deal is the latest in a series of transactions to deliver on that promise, including several European expansions for Vantage Data Centers.

A Larger Platform for Colony’s Edge Ambitions

DataBank is Colony’s vehicle to target the opportunity in edge computing, which brings data and services as close to the end user as possible. “We believe the edge currently and for the foreseeable future resides in traditional data centers in secondary markets,” Colony Capital said in an investor presentation, saying DataBank offered “control of key interconnection points, which drive a compelling value proposition for cloud and content players as they push workloads toward the edge.”

The zColo acquisition will provide DataBank with a larger canvas on which to paint its vision of an edge-powered colocation network. The zColo colocation operation was part of Zayo Group’s digital infrastructure holdings, which were focused on metro and long-haul fiber networks in the U.S.

Zayo Group will become a significant customer and continue to be an anchor tenant within the zColo facilities. DataBank customers will benefit from access to Zayo’s global fiber network, enabling companies to get their data anywhere in the world. With a long-term agreement in place, the companies say they will collaborate closely in bringing colocation solutions to Zayo’s fiber customers and private fiber network solutions to DataBank’s colocation and cloud customers.

The transaction also significantly accelerates DataBank’s edge and hybrid cloud strategies. The expanded data center footprint provides DataBank’s customers with more places to house mission-critical content, data, and workloads closer to end-user populations in key markets like Los Angeles, Denver, Chicago, Miami, Boston, and New York City. Zayo’s data center assets also bring to DataBank a set of valuable network hubs and carrier hotel facilities, boosting its network-neutral interconnections and adding diversity to the DataBank footprint.

Zayo Group will become a significant customer and continue to be an anchor tenant within the zColo facilities. With a long term agreement in place, the companies expect to collaborate closely in bringing colocation solutions to Zayo’s fiber customers and private fiber network solutions to DataBank’s colocation and cloud customers.

“This agreement allows both parties to focus on their core strengths,” said Dan Caruso, Zayo Group’s CEO. “We’ll continue building the most fiber-rich digital infrastructure in the world while DataBank focuses on hosting the innovations and digital workloads that our fiber and network infrastructure were designed to fuel.”

Colony Family Relationships

The transaction is being funded by an investor group led by Colony, DataBank’s controlling shareholder, which includes Nuveen Real Estate and others. Colony has invested $145 million from its balance sheet to support the acquisition and maintain its 20% stake in DataBank, and lined up a consortium of equity investors and debt financing to fund the deal.

Colony Capital acquired DataBank and Vantage through its 2019 purchase of Digital Bridge for $325 million. Digital Colony, another investment vehicle operated by Colony, then partnered with private equity firm EQT Partners to acquire Zayo Group for $8.2 billion in cash.

Colony believes 5G wireless will usher in a “network society” in which digital infrastructure will provide the connective tissue. With a growing portfolio and nearly $60 billion in assets, Colony has the resources to make a major splash in the data center sector. DataBank represents the growing platform for Colony to gain exposure to the colocation and edge computing market, with “significant organic growth and acquisition opportunities,” Colony says.

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