Equinix and GIC Sign Second $1B Hyperscale Data Center Deal in Japan

Global data center and interconnection company Equinix has signed a second $1 billion initial joint venture partnership with GIC, Singapore’s sovereign wealth fund – to develop and operate xScale data centers in Japan. The two companies inked their first $1 billion+ hyperscale data center joint venture deal for the Japanese market last July.

The three initial facilities in the joint venture – one in Osaka and two in Tokyo – will serve the unique core workload deployment needs of a targeted group of hyperscale companies, including the world’s largest cloud service providers (CSPs). The initial three facilities included in the joint venture will provide approximately 138 megawatts (MW) of power capacity to the Osaka and Tokyo markets when fully built-out.

With these xScale data centers, hyperscale companies can add core deployments to their existing access point footprints at Equinix, enabling their growth on a single platform that can immediately span 55 global metros and offer direct interconnection – within a vibrant set of ecosystems – to their customers and strategic business partners.

“Following our successful partnership with GIC on the initial joint venture in Europe announced last year, we are now xScale data center continuing our partnership with the formation of a new joint venture in Japan,” said Charles Meyers, President and CEO, Equinix.

Under the terms of the agreement, GIC will own an 80% equity interest in the joint venture and Equinix will own the remaining 20% equity interest. The joint venture is expected to close in 2H 2020, pending regulatory approval and other closing conditions.

“Japan is a strategic country for regional hyperscale expansion, and the demand for data center capacity in the Tokyo and Osaka markets has outstripped supply,” said Jabez Tan, Head of Research, Structure Research. “Through this new joint venture, Equinix and GIC will be a top provider of new data center capacity for the world’s largest hyperscale companies seeking to expand in these two strategic markets – leveraging Equinix for both their core workload and interconnection requirements. This expansion aims to accelerate the adoption of hybrid and multicloud architectures by companies throughout the region.”

AWS, Alibaba, IBM, Google, Azure

For years, the world’s largest cloud service providers, including Alibaba Cloud, Amazon Web Services (AWS), Google Cloud, IBM Cloud, Microsoft Azure and Oracle Cloud Infrastructure, have partnered with Equinix to leverage its global platform of 210 data centers – to directly connect to their strategic business partners and customers. As these companies continue to expand in Asia-Pacific, they require capacity at scale to match their internal compute, storage and edge cache requirements.

Equinix is a top data center provider in Japan with 13 International Business Exchange (IBX) data centers and more than 500 employees

These new xScale data centers would provide hyperscale companies with a differentiated value proposition from existing wholesale data center operators in two key areas:

• xScale data centers offer access to Equinix’s comprehensive suite of interconnection and edge services. These services will tie into the hyperscale companies’ existing access points at Equinix, “thereby increasing the speed of connectivity to their existing and future enterprise customers.”
• xScale data centers will be engineered to meet the technical and operational requirements and price points of core hyperscale workload deployments. This would enable hyperscale companies to consolidate core and access point deployments into one global provider- “to streamline and simplify their rapid growth.

GIC vs. Equinix, Assets and Investments

Upon closing of this joint venture, GIC is expected to have contributed cash to fund its 80% equity interest in the joint venture. Equinix is expected to have transferred its Tokyo TY12 and Osaka OS2 development assets, along with development rights and the land for an additional data center in Tokyo, to the joint venture in return for a 20% equity interest in the joint venture and net cash proceeds in excess of $100 million.

Financing for the joint venture is also expected to close in 2H 2020 and is anticipated to consist of a delayed draw term loan facility and a revolving credit facility. Proceeds from the delayed draw term loan facility are expected to fund a portion of the consideration paid to Equinix for the sale to the joint venture of TY12 and OS2 development assets, as well as to fund a portion of the planned development and construction costs for those assets. The revolving credit facility is expected to be available for working capital needs and other general corporate purposes of the joint venture. Citi served as exclusive financial advisor to Equinix in connection with this transaction.

“Hybrid and multicloud have emerged as the clear IT architecture of choice, and Equinix is continuing its efforts to satisfy both the interconnection and core workload needs of the top hyperscale and cloud companies powering this infrastructure,” said Charles Meyers, President and CEO, Equinix. “Following our successful partnership with GIC on the initial xScale data center joint venture in Europe announced last year, we are now continuing our partnership with the formation of a new joint venture in Japan. The new facilities under this JV will allow our hyperscale customers to streamline their continued growth, while strengthening Equinix’s leadership position in the cloud ecosystem.”