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Data Center Industry Rumor Mill: T5 Data Centers, Macquarie, Digital Realty, Ascenty and Amazon

Industry Rumour Mill

The data center industry rumor mill is in overdrive this week amid speculation of a big buy-out, a $1b acquisition and the cloud fight for a multi-billion dollar partnership with the US Defense Department.

Australia’s Macquarie Group May Acquire Majority Stake in T5 Data Centers
According to anonymous sources, Macquarie Capital, the advisory and investing arm of Australia’s Macquarie Group, is close to finalizing a deal to purchase a majority stake in US-based data center operator T5 Data Centers. T5 operates facilities in Ireland, New York, Los Angeles, Atlanta, Dallas, Chicago, and Portland, Oregon, with another center under construction in Fort Worth, Texas.

The anticipated $800 million transaction, fronted by Iron Point Partners LLC, could be announced within days, and is contingent upon approval from the US Committee on Foreign Investment. Representatives for Macquarie, T5, and Iron Point Partners are yet to publicly comment on the deal.

Macquarie Capital has several existing US real estate interests, including a partnership with RHP Properties and a share in apartment owner Stonehenge Management LLC.

Digital Realty Considers $1 Billion Acquisition of Ascenty
Digital Realty, the world’s second largest colocation provider, is tipped to be considering the acquisition of Brazilian data center operator Ascenty. According to sources, the deal may be in the form of a joint venture, similar to Digital Realty’s $1.8 billion Japanese data center partnership with Mitsubishi Corporation.

Reports valued Ascenty at approximately $1 billion in April this year. The company is backed by Great Hill Partners and counts Amazon, Oracle and Facebook among its clients.

With a market value of $24 billion, Digital Realty controls 8% of the global data center market, behind Equinix with 13%. The purchase would help Digital Realty expand its Latin American footprint with the inclusion of Ascenty’s eight data centers in Sao Paulo, Rio de Janeiro and Ceara, and a further six under construction.

Amazon Jockeys with Competitors for Lucrative Pentagon Cloud Computing Contract
At least nine major technology companies are competing with Amazon to secure a lucrative long-term Pentagon cloud-computing contract. A coalition that includes IBM, Microsoft, Oracle, Hewlett Packard, VMware, Dell, Red Hat, SAP and General Dynamics is believed to be in the running. However Amazon, the world’s largest cloud services provider, is thought to be the main contender for the highly contentious contract.

The other companies fear that the government will award the $10 billion Joint Enterprise Defense Infrastructure (JEDI) contract to a single bidder, after it announced a winner-take-all approach in March this year, contrary to the established model for awarding military contracts.

Unhappy with the single-source arrangement, Amazon’s rivals have initiated discussions around bidding jointly for the contract. The allies have been communicating via telephone and email, placing ads in The New York Times, and lobbying lawmakers and officials in an attempt to persuade the government to divide the spoils among multiple vendors. Even sworn enemies Microsoft and Oracle have found common ground in the fight.

Dana Deasy, the Pentagon’s new CIO, is responsible for overseeing the contract, which the government intends to award by September. Deasy previously held the role of CIO for JPMorgan Chase.

For Amazon, winning such a large and important contract would cement its position as the number one cloud services provider, and further enhance the company’s reputation among its extensive client base. It’s no surprise that IBM, Microsoft, Oracle and co. are highly motivated to prevent the deal.

Amazon still faces several hurdles, with House Republicans last month proposing a policy bill that could prevent the Pentagon from releasing the necessary funds until Defense Secretary, Jim Mattis, can provide a suitable explanation as to why the contract should be awarded to a single provider.

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