Infrastructure investors catch the tech bug

[HONG KONG] An unsexy corner of the investment world is getting a little racier. The infrastructure and real estate investment arm of Macquarie is in advanced talks to buy data-centre company AirTrunk for over A$3 billion (S$2.78 billion), Bloomberg reported last week. Growing data consumption is fuelling demand for storage warehouses, especially in the Asia-Pacific. It's the latest way technology is turning a humdrum thing into a hot bet.

Goldman Sachs and TPG-backed AirTrunk is busy building a network of so-called hyperscale data centres in Sydney, Hong Kong and Singapore, and plans a rapid expansion across the region. It's these kinds of outfits, where cloud meets the ground, that are enjoying a record M&A (mergers and acquisitions) bonanza: volumes almost tripled last year, with 55 deals valued at a combined US$14.4 billion, versus 22 worth a sum of US$5.5 billion a year earlier, according to Dealogic.

A hunger for reliable yield assets is building up towering multiples, too. Australia's NextDC and US-listed Chinese developer-operator GDS trade at 29 and 45 times last year's Ebitda (earnings before interest, taxes, depreciation, and amortisation), respectively. Assuming AirTrunk's annualised contracted Ebitda stands at over A$100 million, as reported by the Australian Financial Review, the mooted sale price, if it includes debt, could be roughly 30 times.

Data usage trends from cloud adoption to the advent of 5G mean developers can't keep up with demand. In the Asia-Pacific, Internet users climbed 10 per cent year on year between 2016 and 2018, according to Jones Lang LaSalle.

Meanwhile, global revenue for the "co-location" data-centre market, where companies provide a shared, secure space for servers, is growing at a compound annual rate of 15.7 per cent and is expected to reach US$60 billion by this year, the property services firm reckons.

Warehouses have also had a boost from the rise of e-commerce, as everyone from Amazon to Walmart competes for speed on delivery of goods: over in the US, Prologis agreed in October to buy Liberty Property Trust in a nearly US$10 billion all-stock deal. True, similar bubbles have burst in the past. Demand for data-centre capacity collapsed between 2001 and 2004 after the dotcom bubble burst, for example. Yet with no sign of a crunch, demand for new oil should further drive deal-making.

An affiliate of Australia's Macquarie is in advanced talks to buy AirTrunk in a deal that could value the designer, developer and operator of data centres at more than A$3 billion, Bloomberg reported on Jan 4, citing unnamed people with knowledge of the matter.

Macquarie Infrastructure and Real Assets, the bank's infrastructure investment arm, is the preferred bidder for the company, the report said.

AirTrunk is owned by investors including Goldman Sachs and TPG Sixth Street Partners. The company opened Australia's first so-called hyperscale data centre and has others under development in Australia, Hong Kong and Singapore.

REUTERS