KKR, Global Infrastructure Partners to Snap Up CyrusOne for $15B

Texas-based real estate investment trust CyrusOne Inc. (CONE) has signed an agreement under which it will be acquired by global investment firm KKR & Co. (KKR) and infrastructure investment firm Global Infrastructure Partners (GIP) for nearly $15 billion.

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CyrusOne is engaged in the design, construction and operation of over 50 data centers across the world. Following the announcement of the news, shares of the company gained 4.7% on Monday to close at $89.45.

Transaction Details

As per the terms of the agreement, KKR and GIP will assume CyrusOne’s debt and buy all its outstanding common shares for $90.50 per share, which reflects a premium of around 25% to CyrusOne’s closing stock price on September 27.

Furthermore, the acquisition is expected to close in the second quarter of next year, following which CyrusOne’s common shares will not be listed on any public market. (See Insiders’ Hot Stocks on TipRanks)

Management Comments

The Interim President and CEO of CyrusOne, Dave Ferdman, said, “KKR and GIP will provide substantial additional resources and expertise to accelerate our global expansion and help us deliver the timely and reliable solutions at scale that our customers value.”

The Managing Director at KKR, Waldemar Szlezak, and Will Brilliant, Partner at GIP, said, “We see numerous opportunities ahead to continue expanding CyrusOne’s footprint across key global digital gateway markets and look forward to leveraging our global resources, access to long term capital and deep expertise to support the company’s growth.”

Wall Street’s Take

After the announcement of the acquisition, Raymond James (RJF) analyst Frank Louthan downgraded the rating on CyrusOne to Hold from Buy with a price target of $87 (2.7% downside potential).

Louthan sees the offer price of $90.50 as fair and does not expect any other buyer to beat the offer.

The analyst said, “Given the issues with potential rent roll-downs from larger customers, the buying pool is limited and investors can see better opportunities elsewhere in the sector.”

Analyst Recommendation

Overall, the stock has a Moderate Buy consensus rating based on 6 Buys and 14 Holds. The average CyrusOne price target of $87.82 implies 1.8% downside potential. Shares have gained 28.2% year-to-date.

Risk Analysis

According to TipRanks’ Risk Factors tool, CyrusOne is at risk mainly from two factors: Finance & Corporate and Legal & Regulatory, which account for 34% and 25%, respectively, of the total 68 risks identified for the stock.

Under the Finance & Corporate risk category, the company has 23 risks, and under the Legal & Regulatory category, there are 17 risks. The details of these risks can be found on the TipRanks website.