KKR, Singtel to Invest Up to $2.2B in Data Centre Operator STT GDC

KKR and Singapore telecom operator Singtel have agreed to invest as much as $2.2 billion for up to an 18.3 percent combined stake in ST Telemedia Global Data Centres in what stands as the largest digital infrastructure investment in Southeast Asia so far this year.

The US private equity giant, together with Singtel, has signed definitive agreements to invest an initial S$1.75 billion ($1.29 billion) in the Singapore-based data centre operator as a boost to its further expansion, according to a joint announcement by the three companies on Tuesday.

“With the industry experiencing unprecedented cloud and AI-led growth, this strategic partnership with KKR and Singtel will be a significant catalyst for STT GDC’s next chapter of growth as a leader in the digital infrastructure industry,” Bruno Lopez, president and group CEO of STT GDC said in the statement.

With digital infrastructure becoming one of the most-favoured asset classes among global institutional investors the deal provides KKR and Singtel with the opportunity to own a slice of a data centre operator which currently has 95 facilities with a capacity of more than 1.7GW across 20 major markets.

Two-Stage Deal

Under the terms of the agreement, KKR and Singtel’s initial investment subscribes them to redeemable non-voting preference shares in STT GDC, with those shares accruing dividends at a rate of 6.5 percent per annum if paid on a cash basis. The investors will also be issued detachable warrants to subscribe for ordinary shares in STT GDC.

KKR and Singtel may exercise the warrants any time in the next seven years if the pair inject an additional S$1.24 billion into STT GDC, which would give them an aggregate stake of approximately 18.3 percent in the company. Should the warrants be fully exercised, KKR would then have a 14.1 percent stake in STT GDC with Singtel holding a 4.2 percent share.

“Data centres serve as an important backbone of the digital infrastructure that enables an increasingly digital economy and many critical industries globally,” David Luboff, co-head of KKR Asia Pacific and the company’s head of Asia Pacific infrastructure said in the statement. “Our investment in STT GDC is a rare opportunity to support the growth of a leading data centre platform with a terrific track record of growth and significant potential, whilst deepening our existing collaboration with Singtel.”

KKR is making the investment from its Asia Pacific Infrastructure Investors II Fund, which closed on $6.4 billion in equity early this year with the company at that time having already built its Asia Pacific infrastructure assets under management to $13 billion.

Earlier this month the company, together with Global Infrastructure Partners and other fund managers, pledged at the Indo-Pacific Partnership for Prosperity to invest $25 billion to develop infrastructure in the Indo-Pacific region.

In September of last year KKR committed up to S$1.1 billion for a 20 percent stake in Singtel’s Nxera regional data centre business and in March this year the company acquired an additional stake in Philippine cell tower Pinnacle Towers for $400 million.

STT GDC Expansion

Founded ten years ago, STT GDC has operations in Singapore, the UK, Germany, India, Thailand, South Korea, Indonesia, Japan, the Philippines, Malaysia and Vietnam, according to its website. In 2020 the company boosted its holdings in Chinese data centre operator GDS to 34.2 percent.

STT GDC’s parent entity, ST Telemedia, is wholly owned by Singapore government investment manager Temasek Holdings.

“Since founding STT GDC, we have steadfastly supported its evolution and growth,” said Stephen Miller, president and group CEO of ST Telemedia. “Today’s announcement marks another important milestone for STT GDC with the introduction of two new marquee investors to enhance its global growth strategies.”

During the past half-year STT GDC has been rapidly expanding its footprint including entering the Malaysia market with a pair of projects in November.

In May the company followed up by announcing its entry into Vietnam and unveiled a $1 billion partnership with Manila’s Ayala Group to develop a data centre in the Philippine capital as its first project in the island nation.