21 December 2016 – Financial Times
Elegant Jubilee’ consortium buys 49% of data centre business from Reubens
Global Switch, the data centre company owned by the billionaire Reuben Brothers, has sold a 49% stake in the business to a consortium of Chinese investors, despite concerns about national security.
The stake has been sold for £2.4bn in cash to a consortium called “Elegant Jubilee”. The figure is in line with reports that the business had been valued at around £5bn. Global Switch has long been linked with a potential float or trade sale. David and Simon Reuben purchased it in 2004 for a reported £585m, but have invested more than £1bn in expanding the business.
Li Qiang, a major shareholder in Chinese data centre company Daily-Tech Beijing, pulled together the consortium. The largest investor comes from outside the technology sector in the form of Jiangsu Sha Steel Group, the largest private steelmaker in China.
Global Switch tried to quash any suggestion of security issues resulting from the sale to Chinese backers by stressing that its data centres would continue to comply with the UK Centre for the Protection of National Infrastructure, as part of the government’s national security strategy. It has argued it is more like a real estate business and does not have access to the servers installed at its locations. Sir Malcolm Rifkind, the former MP who previously ran the government’s intelligence and security committee, said in September that intelligence agencies should be consulted about a Global Switch sale to determine whether an intervention was necessary on security grounds.
It is the second British data centre company to be tapped by international investors in the past 18 months after Equinix of the US paid £2.35bn to buy Telecity. The investment in Global Switch also comes just weeks after Chinese regulators increased scrutiny on outbound investment. The central government has encouraged groups in good financial health to buy overseas technology that complements their businesses at home. However, China’s foreign exchange regulator also plans to crack down on investments used to move cash offshore, as the country’s economy slows and its currency depreciates against the dollar. Companies and private equity funds in China invested about $146bn overseas during the first 10 months of the year, surpassing the amount invested during the whole of 2015.
The consortium investing in Global Switch brings together a diverse range of interests — from Jiangsu Sha Steel, which has made its first appearance on the global stage through its investment, to Ping An, one of China’s largest financial conglomerates. The consortium resembles several deals proposed this year in which a strategic buyer, sometimes contributing little equity to the deal, is backed by a wide range of financial investors. In July, German lighting manufacturer Osramagreed to sell its lamps business to a first-time overseas Chinese buyer called MLS. The €400m deal was backed by IDG Capital Partners and Yiwu State-Owned Assets Operation Center.