CyrusOne is ‘Open to All Avenues’ Amid Renewed Deal Rumors

Amid speculation about a possible acquisition, the leadership of data center developer CyrusOne says it is “open-minded” about options for a sale or partnership, but remains focused on its business and continues its search for a permanent CEO.

CyrusOne has traded near its all-time high in recent weeks after an Oct. 20 upgrade from a prominent securities analyst, citing industry sources saying the company  “is likely to be acquired soon.” The speculation comes amid an active year for data center M&A activity, including Blackstone’s $10 billion deal to acquire QTS Data Centers.

Executives are loathe to discuss market rumors. But when CyrusOne reported its earnings last week, interim CEO Dave Ferdman decided to address the issue.

“I am not going to comment on any market rumor,” said Ferdman. “What I will say is that we are open-minded to all avenues and alternatives to maximizing our shareholder value. Our Board and management team are committed to this. Our assessment of the best way to maximize value is to keep our shareholders’ interest as our top priority. This is our guiding principle.

“In any case, we have to continue to execute,” Ferdman added. “The only way for us to focus on maximizing value is to execute. We land bank, we get power, we build data centers, we install customers, we take care of them, and that’s what we do. We block and we tackle, and we’ll continue to block and tackle.”

Here are some of the highlights in the quarterly update:

• The company leased 20 megawatts (MWs) of capacity, totaling approximately $38 million in annual GAAP revenue.
• CyrusOne brought 38 MWs of data center capacity online during the quarter, and has 49 MWs under development across London, Frankfurt and Northern Virginia.
• 55% of rent is from hyperscale customers. European markets continue to perform very well, representing nearly half of year-to-date leasing. The company now has a European footprint of 220 MWs.
• CyrusOne raised its 2021 guidance, increasing the lower end of its guidance range for base revenue by $10 million, resulting in a $5 million increase in the midpoint.

“With the demand and with the growth in both the hyperscale market and the enterprise at scale, we feel like we’re really well positioned,” said Ferdman.

A Renewal of M&A Speculation

Ferdman returned to lead CyrusOne in July, when Bruce Duncan left the company after just a year as CEO. Ferdman is the fourth CEO for CyrusOne in the past 18 months.

CyrusOne has been in the deal spotlight before. Last week’s call was reminiscent of a 2019 earnings call in which then-CEO Gary Wojtaszek told investors that the company had decided to remain independent. “We are not currently pursuing a sale of the company,” Wojtaszek said, ending weeks of speculation following reports that the company was fielding suitors.

In last week’s call, CyrusOne took a different approach in expressing its openness to strategic alternatives. The most recent takeover chatter began on Sept. 28, when the stock jumped 7% after Reuters reported that CyrusOne was exploring its options, including a potential sale.

At its current share price, CyrusOne is valued at about $10.4 billion, meaning an acquisition could exceed the $10 billion QTS deal, thus far the richest in a series of billion-dollar deals that are reshaping the sector.

The current round of M&A and consolidation has been underway for about five years, amid a historic influx of investor capital for digital infrastructure.

No Change in Data Center Operations

CyrusOne executives also downplayed the significance of reports that the company had outsourced its US data center management to JLL. CyrusOne has previously used third-party firms to manage its data centers, company executives said.

“There’s no change in our operating model across our sites,” said John Hatem, the Chief Operating Officer for CyrusOne. “It’s a vendor, and we have lots of them. There’s no change to how we run the business day to day.”

In the meantime, Ferdman says CyrusOne continues its process to select a new permanent CEO.