Cyxtera to merge with Starboard SPAC in a $3.4 billion deal

By Nancy Dahlberg

After Cyxtera goes public, Manny Medina and Nelson Fonseca will continue to lead the company

Cyxtera Technologies, the Coral Gables-based global data center provider founded by tech pioneer Manny Medina,  said on Monday it has agreed to go public through a merger with a blank-check firm.

The deal with Starboard Value Acquisition Corp. values  the combined entity at $3.4 billion.

After the merger, Cyxtera will be listed on the Nasdaq under the new ticker symbol “CYXT.” As part of the deal, Cyxtera will receive $654 million, including $250 million from private investors such as Fidelity Management & Research Company LLC and clients of Starboard.   

Cyxtera provides co-location services, which allow companies to keep their privately-owned servers and networking equipment in a third-party data center. Founded in 2017 through the carve-out of CenturyLink’s (now Lumen) data center and colocation business, Cyxtera has grown to become the largest privately held data center provider of retail colocation services globally, the company said. Cyxtera operates 61 data centers in 29 markets globally and counts more than 2,300 enterprises, service providers and government agencies among its customers.

Upon completion of the transaction, the combined company will be the third largest publicly held global provider of retail colocation and Einterconnection services. Cyxtera generated estimated revenues of $690 million and adjusted earnings of $213 million in 2020. Cyxtera is  backed by private equity firms BC Partners and Medina Capital, which will roll all  of their equity stakes into the combined company. Cyxtera's current owners will own about 58% of the combined company. 

“In 2017 we identified a huge opportunity – a premium portfolio of high-quality data center assets with the potential to become a leading global provider in the highly attractive retail colocation market. Nearly four years later, not only has our experienced team successfully deployed new core systems, a new salesforce and a new brand, we have implemented our strategy to provide deeply connected and intelligently automated infrastructure solutions to businesses around the world,” said Medina, Executive Chair of Cyxtera and founder and Managing Partner of Medina Capital, in a statement.

Starboard Value Acquisition, a special purpose acquisition company (SPAC), is sponsored by an affiliate of Starboard Value LP, a New York-based hedge fund led by Jeff Smith. SPACs - one of Wall Street’s investment vehicle darlings this year - are shell companies that raise money through an initial public offering to take a private company public.

“In addition to helping accelerate our growth along multiple vectors, Starboard’s deep expertise across corporate governance, operational excellence, and capital allocation will immediately benefit us as a public company, as we drive long-term value creation,” Medina said.

 Medina and Nelson Fonseca, who previously built and ran Terremark Worldwide until its  sale to Verizon, will continue in their current roles as Chair and CEO, respectively, of the new combined company, which will be called Cyxtera Technologies. Other members of Cyxtera senior management team will also stay on. The merger is expected to be complete in mid-2021.

“Cyxtera is at an exciting inflection point, poised for significantly improved growth and profitability in an industry with powerful secular tailwinds. Cyxtera’s world-class team, led by Manny and Nelson, has built a high-performance, trusted, and reliable global platform, without losing their customer focus or passion for innovation,” said Smith, Chair of SVAC and CEO of Starboard Value, in a statement. “Cyxtera is exactly the kind of opportunity we were targeting when we created SVAC.”

The SPAC raised $360 million when it went public in September last year.

Just two weeks ago, Miami-based cybersecurity company Appgate, a spinoff of Medina’s Cyxtera, announced it would also become a public company through an  agreement to merge with the publicly traded SPAC Newtown Lane Marketing in a $1 billion deal.

In addition to founding Cyxtera and Medina Capital, Medina founded and launched eMerge Americas in 2014, Starting it all, Medina founded Terremark Worldwide, the data services company he led and sold  to Verizon Communications for $1.4 billion in 2011.

This story has been updated. Follow @ndahlberg on Twitter and email her at ndahlbergbiz@gmail.com

 

Nancy Dahlberg
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