The Azrieli Group (TASE: AZRG) confirmed in a filing to the Tel Aviv Stock Exchange with a Reuters report that it has signed a deal to sell Canada’s Compass Data Centers for $5.7 billion to a consortium led by Brookfield Infrastructure Partners LP. and the current Ontario Teachers’ Pension Plan. Azrieli Group owns 32% of the company. Its share price jumped on the news.
The notice states: “Subject to completion of the transaction, the company’s cash flow will amount to $880 million (NIS 32 billion). The company estimates at the time of this report that the transaction, if completed, would have a material impact on its results. If the transaction takes place and consideration is received In full, the surplus cash flow (before tax) from the company’s investment in Compass amounts to 2 billion shekels and the estimated accounting gain (before tax) 1.3 billion shekels.
About an hour ago, Azrieli Group gave notice that it intended to make a material announcement, and stopped trading in its shares. The share price was up 11% up to that point today.
The acquisition of ownership of Compass Data Centers in July 2019 marked Azrieli Group’s first foray into the data center business. Azrieli initially bought 20% of the company for $135 million, and later increased her ownership to nearly a third of the company.
In August 2021, the Azrieli Group bought 100% of the Norwegian data center company Green Mountain, which became the goose that laid the golden eggs for Azrieli, after it won a bid by the Chinese company ByteDance, which operates the TikTok application, to build 90 megawatts. A server farm in Norway with an investment of 750 million euros (2.8 billion shekels).
In January this year, Azrieli completed the purchase of 100% of two British data center companies. At the end of 2022, Azrieli Group had 17 revenue-producing data center assets, 14 of which were in Compass data centers, in the US and Canada. In the first quarter of this year, data centers generated a net operating income (NOI) of NIS 39 million. The Azrieli Group itself has an additional business in data centers, and the sector is worth NIS 9.6 billion according to the company’s most recent financial statements.
Compass Data Centers is one of the largest developers of data centers in the world. In Israel, through several subcontractors, the company is building three server farms for Amazon Web Services, which won the Israeli government’s Nimbus cloud services tender with Google.
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It is believed that there have been differences of opinion between Azrieli Group management and Compass Data Centers management since the acquisition deal in 2019, and therefore Azrieli Group agreed to accept the purchase offer.
Azrieli Group President Danna Azrieli said: “I am proud to announce this significant transaction. The Company’s investment in Compass marks a significant milestone for its entry into the field, and after examining various possibilities with respect to minority holdings, we have chosen to realize it at an excellent return. Believing in this important driver of growth, the Group will continue to Deepening its activity in this sector through Green Mountain.
Published by Globes, Israel business news – en.globes.co.il – on June 20, 2023.
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