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Interxion and TelecityGroup Reach Non-Binding Agreement on All-Share Merger Interxion announces 2014 preliminary unaudited results

February 2015 by Marc Jacob

Interxion Holding N.V. (“Interxion”) announces that it has reached a non-binding agreement on an all-share merger with TelecityGroup plc (“TelecityGroup”). The proposed transaction would be structured as an offer by TelecityGroup for Interxion and the primary listing for the combined group would be in London, where TelecityGroup’s shares are admitted to trade on the London Stock Exchange (LSE: TCY); with a New York Stock Exchange listing for TelecityGroup’s existing ADR programme contemplated.

TelecityGroup, headquartered in the United Kingdom, is a provider of data centres, operating highly connected facilities in key European cities.

The boards of Interxion and TelecityGroup believe the combination of TelecityGroup and Interxion businesses is highly compelling. Demand for data centre services is evolving rapidly as enterprise data and digital applications migrate to the cloud. The combined business will allow the parties to provide customers with greater product choice and solutions for the dynamic and expanding needs of multi-faceted customers seeking to address global markets. The additional scale and scope of the combined operations will give customers an expanded product set, more robust connectivity choices, better landing points for access to European consumers and expanded gateways to new markets in Africa, Asia and Eastern Europe.

Further, the key benefits of the proposed combination would include:

Enhanced complementary customer offerings using the best practices of TelecityGroup and Interxion which, coupled with the expanded geographical footprint of the combined group, will give customers access to the combined portfolio of services across Europe;

Significant synergy potential. Incremental EBITDA from cost synergies and enhanced growth opportunities are estimated by TelecityGroup to be approximately £40m per year and capital expenditure synergies are estimated by TelecityGroup to have a net present value of approximately £300m. In total, this equates to a net present value of total synergies of approximately £600m. In addition, TelecityGroup would expect substantial incremental benefits from technology, capital productivity and commercial synergies, as well as tax and other financial synergies; and Enhanced access to the capital markets and the opportunity of a lower cost of capital. Combined balance sheet strength and capital allocation discipline would enable the combined group to capitalise on future growth opportunities as well as deliver predictable capital returns to shareholders.

Under the terms of the non-binding agreement, Interxion shareholders would receive 2.3386 new TelecityGroup shares per Interxion share. As a result, Interxion shareholders would own approximately 45%, and TelecityGroup shareholders approximately 55%, of the combined group. The primary listing for the combined group would be in London with a New York Stock Exchange listing for TelecityGroup’s existing ADR programme contemplated.

John Hughes would be Chairman of the combined group, with John Baker as Deputy Chairman. David Ruberg would be appointed Chief Executive Officer of the combined group for a period of 12 months following completion of the transaction. He would lead the new, combined group and launch this exciting new phase for both TelecityGroup and Interxion. Eric Hageman would be appointed Chief Financial Officer. The board of the combined group would comprise a balance of independent non-executive directors from both TelecityGroup and Interxion.

Interxion Chairman John Baker said: “I believe that the combination of InterXion and Telecity represents an attractive value creation opportunity for our shareholders, with improved access to capital markets, reduced cost of capital and a strong balance sheet.”

Interxion CEO David Ruberg said: “Bringing together the assets and solutions offered by Interxion and Telecity will improve our customers’ ability to realize the benefits of transitioning to the cloud. Together, we expect to be able to further reduce our customers’ total cost of operation, help them deliver improved functionality to their customers, and deliver industry leading quality of service.”

TelecityGroup Executive Chairman John Hughes said: “We think that the combination of TelecityGroup and Interxion would represent an extremely compelling combination for all stakeholders of both companies. The transaction would truly transform both organisations and allow them to deliver a superior proposition to the joint customer base. In particular, we would like to thank David Ruberg for his key contribution in orchestrating this proposed transaction and we are delighted that he has agreed to launch the new combined group.”

Signing of a binding transaction agreement is subject to, amongst other things, satisfactory completion of mutual due diligence, approval by the Interxion and TelecityGroup’s boards of directors and the negotiation of definitive transaction documentation. Interxion and TelecityGroup have agreed not to solicit or discuss alternative proposals until 4 March 2015 by which time it is expected that a binding transaction agreement will be entered into. Completion is anticipated in the second half of 2015, subject to Interxion and TelecityGroup shareholder approvals and all relevant regulatory and antitrust approvals.

There can be no certainty that a binding agreement will be reached, nor as to the terms of such agreement.

Preliminary and Unaudited Financial Highlights

Interxion also announced certain unaudited financial information today for the three months and year ended 31 December 2014.

Revenue for the fourth quarter and full year is expected to have increased by 15% and 11% to approximately €89.9 million and €340.6 million, respectively (4Q 2013: €78.2 million; FY 2013: €307.1 million) Adjusted EBITDA for the fourth quarter and full year is expected to have increased by 14% and 11% to approximately €38.7 million and €146.4 million, respectively (4Q 2013: €33.8 million; FY 2013: €131.8 million) Adjusted EBITDA margin for the fourth quarter and full year are expected to be approximately 43% and 43%, respectively (4Q 2013: 43.2%; FY 2013: 42.9%) Capital Expenditures, including intangible asset, are expected to total approximately €47.5 million in the fourth quarter and €216.0 million in the full year 2014.

The foregoing information is based on preliminary results and is not intended to be a comprehensive statement of our financial or operational results for the three months ended and year ended 31 December 2014. This information has been prepared by and is the responsibility of management. The company’s external auditors have not audited, reviewed, compiled or performed any procedures with respect to this preliminary financial data. Accordingly, the company’s external auditors do not express an opinion or any other form of assurance with respect thereto. The preliminary results discussed above are derived from our management accounts, rather than our consolidated interim and full year financial statements which will be prepared in accordance with International Financial Reporting Standards. Our preliminary results are based on a number of assumptions that are subject to inherent uncertainties and subject to change. In addition, while we believe these assumptions to be reasonable, over the course of the next several weeks we will be completing our financial statements as of and for the three months ended and year ended 31 December 2014. Accordingly, our actual results may vary from our preliminary results above, and these variations could be material. As such, you should not place undue reliance on the preliminary results information set forth above.

Conference Call to Discuss Results

Interxion will release its fourth quarter and full year 2014 results on Wednesday, 4 March 2015, and will host a conference call at 8:30 a.m. ET (1:30 pm GMT, 2:30 pm CET) to discuss the results.

To participate on this call, U.S. callers may dial toll free 1-866-966-9439; callers outside the U.S. may dial direct +44 (0) 1452 555 566. The conference ID for this call is ‘INXN.’ This event also will be webcast live over the Internet in listen-only mode at investors.interxion.com.

A replay of this call will be available shortly after the call concludes and will be available until 11 March 2015. To access the replay, U.S. callers may dial toll free 1-866-247-4222; callers outside the U.S. may dial direct +44 (0) 1452 550 000. The replay access number is 65645801.

Perella Weinberg Partners LP which is a registered broker dealer with the U.S. Securities and Exchange Commission, is acting for Interxion and no one else in connection with the transaction and will not be responsible to anyone other than Interxion for giving advice in connection with the transaction or any matter referred to herein.

A copy of this announcement is also available, subject to certain restrictions relating to persons resident in restricted jurisdictions, on Interxion’s website at www.interxion.com. The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

Sources and Bases

Information contained within this announcement has been calculated on the basis of the following:

TelecityGroup basic number of shares of 202.9m and fully diluted number of shares of 204.6m Interxion basic number of share of 69.3m and fully diluted number of shares of 70.9m The exchange ratio of 2.3386 new TelecityGroup shares per Interxion share implies a 15% premium to the undisturbed Interxion share price of $26.47 per Interxion share (as at close of business on 9 February 2015)




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