Ping An, Citic Bank and AVIC Trust Join $2.8B Investment in UK Data Centre Developer

Data centre developer Global Switch Limited announced last week that a consortium of Chinese investors including AVIC Trust and Hong Kong affiliates of China Citic Bank, Haoyue Capital and Jiangsu Sha Steel have agreed to pay £2.1 billion ($2.78 billion) to acquire a 24.99 percent stake in the UK-based high tech facility developer.

The sale of shares to Strategic IDC Limited, also includes Global Switch chairman Li Qiang upping his personal stake in the server facility developer from 0.7 percent to 4.8 percent, after the investor in Beijing-based data center developer Daily Tech Beijing led a £2.4 billion acquisition of 49 percent of Global Switch in 2016, with backing from AVIC Trust and Jiangsu Sha Steel.

Mainland Investors Build 75% Stake

Through a vehicle named Strategic IDC Limited, the mainland investors are paying £1.8 billion for their shares in Global Switch, as well as making a further payment of £300 million to Aldersgate Investments Limited, an investment firm owned by billionaire British developers David and Simon Reuben, who have long backed Global Switch, which was founded in 1998.

The company now operates around 340,000 square metres (3,600,000 square feet) of data centre space across Europe and Asia Pacific. After this latest share sale, the mainland-backed investor groups now own over 75 percent of Global Switch.

“I see [the recent Global Switch acquisition] as a strategic pre-IPO investment in a business with an interesting story and deep links to Asia through its chairman and other board members,” said Sam Crispin, who advises Chinese developers investing in the UK and was a formerly a director with PwC in China.

Global Switch has indicated its intent to achieve a public listing on a “leading” international stock exchange in Europe, Asia or the US in 2019. The firm emphasises that the stake sale will not alter its strategic course. In December 2016, it welcomed Elegant Jubilee as a “new strategic investor to support further growth.”

Data Centre Deals Help Investors Climb Over the Great Wall of Capital

While capital controls introduced by mainland regulators have put the brakes on many outbound real estate investments, the rules for data centre deals may be different.

“We know that certain sectors are frowned upon but data centres are not one of them, they feed the domestic strategic priorities of the Chinese economic development plan,” said Crispin. “As such we can expect more [deals] of a similar type and nature.”

Global Switch Links London and Hong Kong Data Centres to Beijing

The share sale further solidifies links between Daily Tech, a major developer and operator of data centre infrastructure across China, where Li Qiang holds a significant stake.

In December 2016, Global Switch announced an agreement with Daily Tech and China Telecom Global (the international arm of ChinaTelecom) to host the Chinese companies at its planned data centre in Hong Kong. The company also agreed to a joint venture with Daily Tech to build a data centre in Shanghai.

In December 2017, Global Switch opened Stage 1 of its cutting edge HK$5 billion 764,237 square feet (71,000 square metres) Hong Kong data centre in the Tseung Kwan O Industrial Estate, among the sites designated by the Hong Kong Science and Technology Parks Corporation for data centre development.