Equinix’s $3.5 Billion Telecity Bid Puts Dutch Deal at Risk

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Equinix Inc.’s takeover bid leaves Telecity Group Plc shareholders with a choice of favoring the $3.5 billion approach from the U.S. data-center operator or backing the British company’s plan to buy a Dutch rival.

A potential offer from Equinix would be a mixture of cash and shares that equal 1,145 pence a Telecity share, the London-based company said Thursday. That’s 27 percent more than the stock’s last close and values the company at about 2.3 billion pounds. Telecity rose the most since its listing on the main London exchange in 2007.

Equinix’s approach comes two months after Telecity agreed to combine with Interxion Holding NV. Telecity’s board is obliged to consider the Equinix offer, it said. The Redwood City, California-based rival will have until June 4 to either announce a firm intention to make an offer or walk away.

“I suspect the shareholders to favor the terms of the Equinix deal,” Milan Radia, an analyst for Jefferies in London, said by phone. Interxion and Telecity managers probably can’t make the terms of their merger any more compelling, and regulatory hurdles for both alternative deals are similar, Radia said.

A deal with Telecity would create “a more compelling combination than the proposed merger with Interxion and would deliver greater value for Telecity shareholders,” Equinix said.

Telecity shares rose as much as 24 percent to 1,116 pence. They traded at 1,085 pence as of 4:05 p.m. in London. Equinix added 1.9 percent to $263.08 in New York for a market value of $15 billion.

’Strategically Compelling’

Interest for data centers is increasing as consumers and companies want to store information remotely so they can access it from mobile phones, tablets and desktop computers. Equinix has operations in the U.S., Canada, Brazil, several countries in Europe and Asia, the United Arab Emirates and Australia. Telecity’s operations range from Dublin to Sofia and Istanbul to Stockholm.

Interxion, which is active mostly in central and northwestern Europe, said in a statement that it continues to believe that a merger with Telecity “is a strategically compelling combination that delivers meaningful value” to shareholders of both companies.