Digital Realty agrees to buy DuPont Fabros for $4.95B

(Bloomberg) -- Digital Realty Trust Inc. agreed to buy DuPont Fabros Technology Inc. for about $4.95 billion in stock, a deal that would add to its data-center properties in areas such as California’s Silicon Valley.

Investors in Washington-based DuPont Fabros will get 0.545 Digital Realty shares for each of their shares, the real estate investment trusts said in a statement Friday. That values DuPont Fabros stock at $63.63 a share, about 15 percent more than Thursday’s closing price. The companies said the transaction has an enterprise value of $7.6 billion, including $1.6 billion of debt.

The deal would allow San Francisco-based Digital Realty to grow in top markets such as northern Virginia, Chicago and Silicon Valley. The combined company would be the largest wholesale data-center REIT in the U.S., analysts at KeyBank Capital Markets said in a note to clients. The transaction would be a boon for the entire sector, reducing competition and helping balance price control, the analysts wrote.

Acquiring DuPont Fabros’ purpose-built data centers “will significantly expand Digital Realty’s hyper-scale product offering and improve its ability to meet the rapidly growing needs of cloud and cloud-like customers,” Digital Realty said in the statement. DuPont Fabros also has six data-center projects under construction that are 48 percent pre-leased.

DuPont Fabros shares jumped 13 percent to $62.55 at 10:17 a.m. New York time. Digital Realty slipped 0.9 percent to $115.73.

The companies said the deal would allow them to save as much as $18 million in costs a year. The combined entity is expected to have the highest earnings before interest, taxes, depreciation and amortization -- a measure of profitability -- of any U.S.-based publicly traded data center REIT, according to the statement.

The transaction, expected to close in the second half of the year, is subject to shareholder approval.

--With assistance from Amy Thomson and Andrew Blackman

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