The CyrusOne IPO, which has yet to set a date, will offer 16.5 million shares at an estimaged price of $16 to $18
Cincinnati Bell announced late Tuesday that its data center subsidiary CyrusOne had commenced its initial public offering, making 16,500,000 shares of common stock available at an estimated price ranging from $16 to $18, in an effort that could raise as much as $341,550,000.
CyrusOne has applied to list the common stock on the NASDAQ Global Select Market under the symbol CONE.
The offering is underwritten by Morgan Stanley and Bank of America/Merrill Lynch, who will be given the option to purchase up to 2,475,000 additional shares from CyrusOne at the IPO price, less their discounts and commissions.
The commencement of the IPO follows the original announcement, back in August, that Cincinnati Bell was planning a CyrusOne IPO, and to reorganize the subsidiary to operate as a real estate investment trust. In the original announcement, Cincinnati Bell said it would use some of the proceeds to restructure some of the debt of the parent organization.
The REIT structure has become a popular structure for operating data center businesses over the last few years; it conveys certain tax benefits provided the organization meets a few strict requirements. The REIT must have most of its assets invested in real estate, and must distribute most of its taxable income to its shareholders as dividends.
As Rich Miller points out in a post on Data Center Knowledge (CyrusOne Sets Range of $16 to $18 for IPO), three of the largest data center developers – Digital Realty Trust, CoreSite Realty and DuPont Fabros Technology – are real estate investment trusts.
Equinix also discussed the possibility of reorganizing as a REIT during 2012.
CyrusOne is a data center business focused pretty exclusively on the operations of the data center and offering colocation services, without much reach into managed services or cloud. And, while it is certainly a supplier of data center capacity to service providers, its main area of focus is on the enterprise data center market.
“Our goal is to be the preferred global data center provider to the Fortune 1000,” says CyrusOne in the company description section of its IPO filing. “As of September 30, 2012, our customers included nine of the Fortune 20 and 108 of the Fortune 1000 or private or foreign enterprises of equivalent size. These 108 customers provided 79% of our annualized rent as of September 30, 2012.”
Cincinnati Bell says that following the IPO, it expects to effectively own about 71.6 percent of CyrusOne through its interests in the common units of limited partnership interest in CyrusOne’s operating partnership, exchangeable for common stock.
Cincinnati Bell acquired CyrusOne in June of 2010 from ABRY Partners for $525 million, which suggests significant growth in the value of the company over the last 30 months, should the estimated value of the IPO hold up.
Talk back: does the pricing of the CyrusOne IPO bode well for the hosting business, or the internet infrastructure business in general? How do you expect the company to perform on the public markets? Let us know in the comments.
About Liam Eagle
Liam Eagle has worked as a contributor to the Web Host Industry Review since its inception in 2000, and as editor since 2003. He has been editor of the WHIR's print magazine since its launch. His daily involvement in the gathering and reporting of Web hosting news and his regular interaction with Web hosting leaders gives him an uncommonly broad appreciation of the issues and tends facing the business. Through his WHIR blog, Liam spots Web hosting trends and offers opinions on the industry-wide impacts of major developments and the motivation behind big announcements. Follow him on Twitter @liameagle
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Data centers are to the Internet service business world what wireless communication towers are to the wireless service business world. As many Wall Street types say, “communication towers are the safest play in the wireless sector” … the same is probably true with data centers, they might be the safest play in the vast Internet sector which includes hosting, software, eCommerce, IM, social media, SaaS, IaaS, co-lo, managed services, network mgt. on and on … especially since the trend for data center ownership is becoming the REIT structure.
I don’t think this trend is healthy specific to hosting rather for all of the Internet service businesses that depend on data centers.
The mother ship of all that is Internet needs to be financially healthy and attractive to even the most conservative investor class.