The Reuben brothers, the billionaire investors in private equity are gearing up for a £1.5 billion flotation of Global Switch, the fast-growing data centre company.
The pair, the tenth richest entrepreneurs in
It is expected a float could come as early as the second half of this year or the first half of 2009, depending on how well the market bounces back from the global credit crunch. The brothers are thought to be weighing up whether to float the company in
The data centre market is projected to enjoy huge growth in demand spurred by regulatory requirements which have increased the need for companies to retain more data and increased demand from companies for back-up IT facilities as part of their disaster recovery plans. Data centre providers typically provide customised space for companies to store their servers and telecommunications equipment.
Global Switch has debt of less than £100m and any float would be likely to raise up to £750m. The Reuben brothers are expected to retain a stake of between 40 and 60% in the business if they proceed with an IPO.
Since taking control, the brothers invested significant resources in strengthening the management team, bringing in Matthew Giles to head up Global Switch in the
During the last two years the company has enjoyed rapid earnings growth. It generated positive cash flow for the first time in 2006, rising to £45m in 2007. This year the business is expected to generate earnings of £80m and it is forecast to comfortably beat £100m in 2009, with earnings forecast to continue increasing dramatically year on year.
Meanwhile occupancy levels have soared from about 55% let in 2006 to an average of almost 80% across the portfolio today. The data centres are attractive to the Reubens because they leased to a raft of big name blue-chip companies including IBM,Shell, BP and Microsoft.
It is thought the brothers have invested more than £170m expanding and upgrading the business during the last couple of years.
Global Switch currently has data centres in
Once the expansion of the five existing sites has been completed this will create in excess of 650,000 sq ft of additional space in the portfolio.
The group is hoping to develop three new data centres in
A flotation of Global Switch would cap a remarkable turnaround in the fortunes of the business that suffered heavy losses after some of its principal tenants collapsed when the dotcom boom turned to bust.
Midlands based entrepreneur Andy Ruhan who founded Global Switch in 1998 cashed out near the height of the dot com boom selling up to a consortium including Chelsfield, once one of
Chelsfield took complete control of the business in March 2002, but the company was hit by a series of tenant failures following the collapse of the dot com boom. Losses and writedowns at Global Switch spiralled to £97m in 2004, pushing Chelsfield into the red. The group's stock market value plunged and it was subsequently taken private by founder Elliott Bernerd in a management buyout backed by a group of investors including the Reuben brothers.
Chelsfield was sold again just a few months later to a consortium comprising Australian companies
The assets were carved up and the Reubens and Multiplex took joint control of Global Switch. The Reubens eventually bought out Multiplex and a minority stake owned by Morley Fund Management to take complete control of the business in 2007