Verizon is acquiring cloud-service provider Terremark Worldwide to compete against Amazon's cloud by offering customers security, IAAS and managed services.
is acquiring Terremark Worldwide for $1.4 billion to enhance its cloud-computing
capabilities, the companies said Jan. 27.
The acquisition of the Miami-based
cloud services and data-center-hosting provider will expand Verizon's ability to
provide IT services to corporate customers. Terremark currently has 13 data
centers scattered throughout the United States, Europe and Latin America, and
offers IAAS (Infrastructure as a Service), security and managed services.
Verizon will be competing with major cloud-services players such as Amazon.
The deal would "accelerate
Verizon's "everything-as-a-service" cloud
," Lowell McAdam, Verizon's president and COO, said on a call with
investors on Jan. 28. Verizon currently operates more than 220 data
across 23 countries.
"We have viewed this space
for a long time as a place we want to grow our business," McAdam said.
Verizon will be tendering an
offer for all shares of Terremark at $19 a share between Feb. 10 and Feb. 17,
Fran Shammo, Verizon's CFO, said on the call. The price is a 35 percent premium
over Terremark's closing price of $14.05 just before the acquisition was
announced. The all-cash deal will increase Verizon's net debt by $2 billion,
Shammo said. The two-step merger is expected to close within 90 days, he said.
Terremark has extensive
relationships with large enterprises and in the government
sector, and combined with Verizon's sales force and distribution network, will
be able to "move very quickly" so that Terremark can "open up new markets" in the
Asia-Pacific region and Latin America, McAdam said.
The "real growth opportunity"
was on the managed-services side, with Terremark's security
and managed-services offerings
, especially within the government sector,
"This is a classic
make-or-buy decision. By the time you build data centers and then outfit them ...
it takes time. And to be honest, that's not our core competency," said
Terremark will operate as a
wholly owned subsidiary and would retain its name. The company's senior
executives will remain, and Manuel D. Medina, currently Terremark's CEO, will
report directly to McAdam.
"We're not going to try to
cramp their style at all. They can support anyone they want to work with,"
Terremark has an extensive
carrier-neutral collocation business, which will remain in place, just as
Verizon will maintain its own collocation services, the executives said. "At
the end of the day, it's the same business, but now with a big brother," Medina
said during the call.
Verizon was a Terremark
customer, the executives said. McAdam said it was likely Verizon will be moving
some applications and data centers to Terremark but provided no details.
The companies will also be
looking at their combined real estate and figure out "where we have space and
land," McAdam said. Terremark has already broken ground on a new data center,
and there is room within the existing Miami data center to expand, he said. "We
will decide where to go next," he said.
Terremark's board has
unanimously approved the deal, but it is still subject to shareholder vote.
Verizon said it has already gotten approval commitments from three
shareholders, representing 27.6 percent of the outstanding stock, Shammo said.
The deal also has to clear Hart-Scott-Rodino regulatory approvals before
closing, Shammo said.
When asked about the impact
of the deal on Terremark's
relationship, executives said there would be none. VMWare bought 4
million shares in Terremark back in 2009, and Terremark uses the VMWare
platform to power its offerings, Medina said.
Terremark has done the "hard
work" in building the data center, assembling the team and developing
relationships, said McAdam. "We can provide the jet fuel to take off, to kick
this into a higher gear," he said.