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Shaw Communications buys data centre for US$1.2B

A 2011 logo for ViaWest is shown. THE CANADIAN PRESS/HO, PRNewsFoto
Original Publication Date July 31, 2014 - 5:55 AM

CALGARY - Shaw Communications (TSX:SJR.B) is buying Colorado-based data centre ViaWest Inc. in a bid to enhance its data services and cloud capabilities.

The US$1.2 billion deal for ViaWest, a privately held providers of data centre infrastructure, cloud technology and managed information technology services, is an art of Shaw's growth plans into businesses that are related to its core telecommunications offerings.

"We identified the North American data centre market as an attractive growth sector for Shaw," Shaw chief executive Brad Shaw said in a conference call to discus the deal Thursday.

"The fundamentals for the North American data centre industry are strong, as demand for data centre services continues to outpace supply."

Growing demand for Internet storage, growth in IP traffic, bandwidth-intensive applications, increased e-commerce transactions and regulatory requirements are all creating demand for this types of services, he said.

"We see mid-market business seeking a higher level of security and reliability for their servers in a more cost-effective and convenient manner," he said. "This is driving demand for IP outsourcing (and) ViaWest is positioned to capitalize on this demand."

The expertise that will become available to Shaw as part of the deal is also expected to help the company with its own Canadian data centre platform and build a suite of data management services.

"We have a management team that will be focused in the U.S. and, as we decided to roll up and focus in on Canada, we'll be able to take that as it comes and do it at a pace we're comfortable with," Shaw said.

As part of the deal, ViaWest's current management team, led by co-founder and CEO Nancy Phillips, will continue to operate the company from its Denver headquarters as a stand-alone, wholly-owned subsidiary of Shaw.

Moody's Investor Services said Thursday that the ViaWest purchase won't affect its ratings for Shaw's debt but the transaction could be a negative because the benefits are uncertain and are only realizable well into the future.

"While the investment is potentially powerful, there are risks that it will not deliver meaningful benefits. At worst, however, it is an asset with value to other companies, and we see limited downside," wrote Moody's telecom analyst Bill Wolfe.

Shaw's rating under the Moody's system is Baa3, slightly below the Baa1 rating it has given Bell Canada, Telus and Rogers, which also have also acquired data centre businesses in recent years.

ViaWest has more than 350 employees and 1,300 customers across seven states and is in western U.S. markets.

Phillips said her company will continue to operate "business as usual," and will be keeping an eye for possible acquisitions in what is a fragmented market.

"We like the opportunity to go to the East Coast potentially over the next 18 months; our customers are pushing us that direction," she said.

"That's an area that we're taking a look at very aggressively."

In Canada, some of the larger independent data centre companies have been purchased.

Cogeco bought Internet infrastructure provider PEER 1 Network Enterprises in late 2012. About the same time, Q9 Networks Inc. was acquired for $1.1 billion by an investor group that includes BCE Inc. (TSX:BCE), the Ontario Teachers Pension Plan Board and two private equity firms.

Rogers Communications Inc. (TSX:RCI.B) made several smaller acquisitions last year. It also opened a new data centre in Calgary in January and expanded its Edmonton data centre as part of its Rogers Data Centres unit, which has 14 locations in nine cities across Canada including Toronto, Ottawa and Vancouver.

Shaw said Thursday that it will fund its acquisition with cash and its existing credit facility, and its board is confirming its previously disclosed target dividend increase of five per cent to 10 per cent in fiscal 2015. It's expected to close in September and is subject to U.S. regulatory approval.

Shaw Communications Inc. is a diversified communications and media company that provides consumers with broadband cable television, high-speed Internet, home phone, serving 3.2 million customers. It operates Global Television and 19 specialty networks including HGTV Canada, Food Network Canada, HISTORY and Showcase.

The company has been losing subscribers in its cable and satellite television services despite strong growth in Internet subscriptions, as it battles competitor Telus Corp.'s (TSX:T) efforts to make inroads in Shaw's residential customer base by offering bundled phone, wireless and fibre-optic television services.

On the Toronto Stock Exchange, shares of Shaw were trading down almost eight cents or nearly three per cent at $ 26.69.

News from © The Canadian Press, 2014
The Canadian Press

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