PAG’s Flow Buying Out Australian Data Centre Operator DXN for $18M 

PAG-backed data centre platform Flow Digital Infrastructure is entering the Australian market through an A$26 million ($17.97 million) takeover of ASX-listed colocation provider DXN, according to an announcement this week.

Flow’s local subsidiary Flow2Edge Australia has agreed to acquire Perth-based DXN, including its businesses manufacturing modular data centres and its seven megawatt portfolio of three operational hosting facilities in Sydney, Tasmania and Darwin, the Singapore-based company said.

“This is an exciting opportunity for Flow as we expand our footprint and enhance our capabilities to better serve our customers,” Flow chairman Kris Kumar said in the statement. “The acquisition will enable us to leverage DXN’s superior edge design and construction capabilities, allow us to control our supply chain, and deliver edge as a service in Asia Pacific.”

For DXN, it said proceeds of the sale will be used to repay debts of A$4 million, with the remainder to be distributed to shareholders as company management proposes to wind up the cash-strapped firm.

Acquiring Modular Tech

The deal provides a foothold for Flow in the Australian market a little over a year after Hong Kong-based private equity firm PAG established the firm with a goal of investing $10 billion in APAC data centres over the next five to seven years.

Flow’s cash acquisition provides it with a portfolio comprising a 5.5 megawatt facility occupying  4,251 square metres (46,800 square feet) in Sydney Olympic Park and a Tier 2+ facility in Tasmania powered entirely by renewable energy.

The third asset is a 350 square metre Tier 3 colocation structure in Darwin, Northern Territories, which DXN acquired last September for A$4.88 million.

The takeover deal is expected to be completed by the end of November, subject to approval by Australia’s FIRB (Foreign Investment Review Board) and DXN shareholders, based on a 5 August disclosure by DXN.

Kumar, who joined the team from Bain Capital-backed Chindata Group last year, vowed Flow will continue to expand its foothold in the region and continue to ramp up its commitments, with PAG having already invested $2 billion in APAC data centres.

‘Sellout Not Taken Lightly’

“We have not taken this decision lightly,” said DXN chairman John Baillie in an ASX disclosure recommending that shareholders accept the takeover deal.

“This transaction is not only a good offer, it also enables us to address the capital requirements for the business going forward,” Baillie added. “We are excited about the opportunities this will create for our customers in the medium to long term.”

Specialising in prefabricated modular data centres, DXN said the sale will enable the company to distribute A$0.011 to A$0.013 per share held by investors, which is equivalent to more than double the company’s three month volume-weighted average share price of A$0.006.

Part of the sale proceeds will be used to repay an A$4 million loan that will mature in October 2025. To sustain its operations while waiting for the buyout to be completed, the company plans to raise an additional A$2.13 million through issuance of new shares.

The firm said in a separate filing that it is also planning to wind up the company once the transaction is completed.

Formerly called Data Exchange Network, the firm raised A$16 million through its 2018 IPO and was the second data centre company to be listed on the ASX after NextDC, which now has a A$5.5 billion market cap.

DXN’s latest quarterly update showed the firm suffered negative cash flow of A$849,000 from April through June even as revenues doubled to A$637,000 in the same period, due to ballooning operating costs.

“In the absence of a superior offer and subject to the conclusions in the independent expert’s report, the directors believe the transaction is in the best interests of shareholders and unanimously recommend shareholders vote to approve the transaction,” DXN said.

Its shareholders will vote on the proposal in a general meeting in late September.

PAG on the Move

Flow’s Aussie move follows its May entry into the Philippine data centre market through a joint venture with local property developer Ayala Land. The Philippine JV aims to develop an initial 4.5-megawatt facility with plans to construct additional carrier-neutral buildings across the country

With $50 billion in assets under management, PAG is also said to be among the major private equity firms vying to buy out Chinese-controlled operator Global Switch in a deal that could be worth $10 billion according to a report by Reuters last month.

Global equity giant KKR and Sweden’s EQT are also among the 10 contenders said to be competing to purchase the firm, which is majority-owned by Chinese steelmaker Jiangsu Shagang Group, and has data centres in Europe along with five facilities in Asia Pacific.

Total IT supply in Sydney, a key data centre market in Australia, breached the 1 gigawatt mark by the end of the first quarter thanks to 144 megawatts additional capacity that went live in the first three months of the year, based on a joint report by Knight Frank and DC Byte.