UK datacenter biz Ark goes on date with private equity suitors

Government supplier said to be valued at $2.5B

The owners of UK-based Ark Data Centres Ltd are locked in negotiations with suitors interested in buying the rack and cloud provider in an agreement said to value the business at around $2.5 billion.

Talk of the sales process began in summer last year when majority owner and hedge fund activist Elliott Management Investment was expected to launch a beauty parade. Revcap holds a minority stake.

New Zealand-based infrastructure capitalist HRL Morrison is among the potential bidders at the table, and another is a competitor also owned by Elliott, according to chatty people that spoke to Bloomberg on the condition of anonymity.

HRL Morrison already has $18 billion worth of investments in its portfolio, ranging from airports to schools, energy provision facilities and datacenters, including Kao Data Centres in the UK.

The sale talks are understood to be at an advanced stage but as is often the case in these situations, until pen has been put to contract there is no guarantee that agreement will be reached.

Ark, founded in 2005, has three bit barn sites in Britain with three more under construction following a £450 million ($543 million) loan facility granted in 2019. The customer list includes a number UK government departments, though AWS and Microsoft are scooping up more public sector cloud wins.

Some Reg readers may remember Ark for its £700 million ($846 million) outsourcing deal to supply the government's entire datacenter estate via the Crown Hosting contract. Ark set up a joint venture in 2015 with the Cabinet Office for Crown Hosting Ltd that it majority-owns.

In terms of products, it sells direct and indirect air-cooled datacenter services and runs chilled water bit barns too. For those who want more than co-location services, Ark punts on-site assistance that includes cross connects, concierge services and remote support.

The business reported a 41 percent hike in turnover to £139 million ($168 million) for year ended June 2021 and recorded an operating loss of £4.6 million ($5.5 million). It listed 80 employees in that year's company accounts.

HRL Morrison did not respond to a request for comment and Ark Data Centres was unavailable at the time of writing.

According to Synergy Research Group, the number of private equity deals for datacenter operators reached 187 in 2022, valued at $49 billion, just over the $48 billion recorded in the prior year.

Private equity accounted for 91 percent of total related M&A activity in the 12 months, up from 66 percent in 2021.

"Datacenters are being viewed as long-term safe havens for investments, even during turbulent times, causing a huge influx in private equity," said the research house.

"Ten of the 12 largest deals in the last 12 months have involved private buyers, with the only exceptions being the Equinix acquisition of Entel's datacenters and Digital Realty's acquisition of a majority stake in Teraco. In the US, only six of the 20largest colocation players are now publicly traded companies."

It looks like Ark Data Centres Ltd may soon join that group. ®

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