Telecity in talks to buy Data Electronics

Telecity Group, Europe’s largest data centre provider, is in early stage talks to buy Irish rival Data Electronics in a deal expected to be valued at £100m.

UK-based Telecity is looking to expand as the popularity of “cloud” computing grows and more companies are interested in using capacity at its data centres. Revenues at Telecity rose 16 per cent last year.

Telecity, whose customers include Walkers crisps, Facebook, and Transport for London, is building three new data centres in London, but is also eyeing up European targets to keep up with growing demand. The company has a credit facility of £300m earmarked for expansion.

“We have seen large companies, such as financial institutions, move from owning their own data centres to leasing space from data centre companies. That trend has been accelerated by the economic crisis,” said James Dodsworth, partner at Mayer Brown, the law firm, who advises companies on data centre deals.

“Business also have a need to manipulate larger amounts of data. Just as today we are sending e-mails on BlackBerries, in a few years time it will be video calls, which will increase the amount of data that needs to be stored exponentially. We are going to see a data storage explosion.”

Telecity operates 24 data centres across leading European cities, including a centre near Dublin. However, it has plans to nearly double its computing capacity.

Data Electronics is one of Ireland’s largest providers of data centre services. It was founded in 1975 as an IT services company, but has recently invested heavily in building up capacity at its two data centres near Dublin. It recently completed a €15m expansion of a eco-friendly data centre in north Dublin, which followed on from an initial €25m investment in 2008.

Data Electronics employs 55 people and had sales of €15.6m in 2010, up 11 per cent on the previous year. About 65 per cent of revenues come from international clients. Its contracts include a €1m deal to develop, support and host internet activities for the Dublin Airport Authority.

Earlier this year, Data Electronics hired Jefferies, the US investment bank, as a financial adviser.

Ireland has emerged as a popular place for companies to locate data centres, with many US technology companies such as Microsoft, Google and Amazon operating facilities in the country. Due to rules on the transfer of data across borders, US companies often need to have European data centres for keeping information on their European customers.

Both Telecity and Data Electronics declined to comment.

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