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Sungard UK offloads three datacenters to Redcentric

But only if enough customers sign new contracts... confirmation deadline is 21 June

Managed service provider Redcentric is buying the "business and assets" of three datacenters owned by troubled Sungard Availability Services but it'll only complete if a volume of customers agree to new contracts.

Sungard went into administration in March following financial difficulties caused by steep rises in energy prices that the company failed to pass onto customers. And a last ditch effort to renegotiate its rental lease with landlords was fruitless.

The first portion of the business was sold last month when Daisy Group confirmed it had agreed a price to transfer the customers from 10 Sungard Workplace facilities to Daisy Corporate Services.

Now the trade and assets of Sungard's London Hounslow LTC Data Centre and Recovery Centre, along with the Woking TC3 bit barn and the Elland TC4 Data Centre and Recovery Centre are being offloaded to Redcentric.

Teneo, the administrators tasked with finding a buyer or buyers for Sungard's UK ops, wrote to customers yesterday about the sale of the server farms, as well as the provision of network services.

"There will be a short period between exchange and completion where services will continue to be provided by [Sungard]. In this period Redcentric will agree a new contract with you. Once the sale completes, the provision of continued services will be at the discretion of Redcentric if you have not signed a new contract with them," the letter states.

"Redcentric will be adopting Sungard's terms and conditions and offering market rates. It is therefore in your interests to sign a new contract with them such that you ensure continuation of services. If you do not sign a contract you will be at risk of your service ceasing from completion."

Customers are told to keep paying invoices "as they fall due", including power invoices, and anything still owned after the sale's completion will be pursued by Tenon.

Ominously, the letter confirms:

"Please note that any pre-payments made since the appointment of Joint Administrators, where services have not been provided by the Company, will be refunded to you in due course. However, any funds paid for services in advance prior to the commencement of the administration will not be transferred to Redcentric, or repaid to customers, irrespective of whether the service has been provided."

Customers can of course "submit an unsecured claim for such funds" but they'll join the queue with other creditors.

Redcentric has also written to customers, saying: "If Redcentric is unable to agree terms with a sufficient volume of Sungard DC customers then completion of the acquisition will not occur and the Administrator will, in the absence of other options, close the Sungard DC business."

It adds that the "window between exchange and completion is three weeks" with contracts needing to be signed and delivered by 21 June.

Customers are being asked to sign up for a minimum of three years, and from the start date Redcentric says it will "immediately cease the additional electricity charges imposed by the Administrators."

These were up to 50 percent higher, according to the letter.

"Given that the electricity surcharges currently being levied by the Administrators will cease immediately on completion of the acquisition, we hope this provides a significant incentive to agree and complete new contracts earlier, as well as enabling a quicker return to a normal and stable service," Redcentric's letter says.

As for colocation prices, they'll rise "10 percent, with this price fixed for the three-year terms of the new contract," Redcentric's letter, seen by The Reg, adds. "These increases are in line with current industry market practice and will enable the acquisition to be viable from an economic perspective," the letter says.

Customers that want to transfer services from the Woking T3 to one of Redcentric's other tier 3 facilities will receive a 50 percent discount on colo prices for six months.

The minimum amount payable by Redcentric on all three DCs – assuming all goes according to plan – is £11 million ($13.8 million), and the maximum amount is £22 million ($27.6 million).

"Pursuant to the performance criteria, which expire 12 months following completion, there is a potential further up to £7.625 million ($9.56 million) payable. All consideration payable will be satisfied in cash," AIM-listed Redcentric told investors yesterday.

Further details of the transaction will be released once completion is agreed "due to the nature of the transaction and its dependence on new contracts agreed with Sungard DC customers."

Sungard employees at the sites will transfer to Redcentric under a standard TUPE arrangement, and all outsourced services will be brought on-shore within six to 12 months after completion, the letter adds.

Separately, Redcentric has paid £4.2 million ($5.26 million) for an AWS consulting and related cloud services business owned by Sungard.

In North America, Sungard's parent has filed for Chapter 11 in April, citing tough economic conditions caused by the pandemic. ®

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