SVAC Stock Price Increases Over 5% Pre-Market: Why It Happened

By Amit Chowdhry ● February 22, 2021
  • The stock price of Starboard Value Acquisition Corp (NASDAQ: SVAC) is trading at over 5% pre-market. This is why it happened.

The stock price of Starboard Value Acquisition Corp (NASDAQ: SVAC) is trading at over 5% pre-market. Investors are responding to an announcement that the special purpose acquisition company (SPAC) is taking Cyxtera Technologies (a leader in mission-critical retail colocation and interconnection services) public as part of a $3.4 billion transaction.

Launched through the 2017 carve-out of CenturyLink’s (now Lumen) data center and colocation business, Cyxtera has grown to become the largest privately held data center provider of retail colocation services globally. And the company’s footprint of 61 data centers in 29 markets around the world serves more than 2,300 leading enterprises, service providers and government agencies, including Capgemini, Cognizant, Cloudflare, Fujitsu, HPE, Nvidia, and Zenlayer. 

Upon completion of the deal, the combined company will be the third largest publicly held global provider of retail colocation and interconnection services. Cyxtera had generated estimated revenues of $690 million and Adjusted EBITDA of $213 million in 2020, its first full year of stable operations following the completion of the carve-out, with a plan to drive significant revenue and EBITDA growth in the future.

Cyxtera offers an innovative suite of deeply connected and intelligently automated infrastructure and interconnection solutions to enterprise customers and leading service providers around the world – enabling them to scale faster, meet rising consumer expectations, and gain a competitive edge. And as an industry leader with a presence in each of the world’s top 101 most important data center markets, Cyxtera delivers world-class performance, security, and reliability to its customer base while also providing flexible solutions that meet their evolving IT infrastructure needs in hybrid IT environments. The company’s API-driven, carrier-neutral platform is ideally suited to deliver a future-ready, extensible, scalable, and interconnected data center experience.

SVAC is sponsored by an affiliate of Starboard Value LP. And Starboard has an 18-year history of public market investing with demonstrated expertise in driving value creation through improved governance, execution, capital allocation, and strategic re-positioning. Starboard has significant experience in the technology sector, including in the digital infrastructure industry. 

Plus Starboard’s partners have directly served on the boards of more than 30 public portfolio companies, overseeing numerous business transformations and partnering with management teams to drive substantial value creation. In addition to its expertise in public company governance and driving long-term value creation, Starboard’s ability to leverage its broad networks, relationships, and perspectives on behalf of the Company makes SVAC an ideal partner for Cyxtera as the Company embarks upon the next phase of its journey.

Cyxtera’s leadership, including Executive Chair Manuel D. Medina, CEO Nelson Fonseca, COO Randy Rowland, and CFO Carlos Sagasta, will continue to lead the company, with Medina and Fonseca also serving on the board of the combined company as Chair and Director, respectively. And SVAC Chair Jeff Smith and Industry Advisor Greg Waters will join the combined company’s board as Independent and Lead Independent Directors, respectively, upon completion of the merger. BC Partners’ Partner, Chairman, and Chairman of the Executive Committee Raymond Svider and Partner Fahim Ahmed will also serve on the combined company’s board.

Upon completion of the deal, including the PIPE described below, the current owners of Cyxtera will retain approximately 58% ownership of the combined company. And the combined company will operate as Cyxtera and expects its common stock to be listed on The Nasdaq Stock Market under the symbol “CYXT” and its warrants under the symbol “CYXTW.”

Cyxtera will receive $654 million of proceeds from a $250 million concurrent private placement of common stock of SVAC (PIPE), priced at $10.00 per share, along with $404 million of cash held in trust, assuming no public shareholders of SVAC exercise their redemption rights. And certain clients of Starboard have entered into a $100 million forward purchase agreement to offset redemptions, if any. The PIPE includes commitments from institutional investors, including Fidelity Management & Research Company LLC, and clients of Starboard. Proceeds of the transaction will be used to partially retire Company debt and provide incremental cash for growth, as well as to pay transaction expenses.

The proposed business combination has been approved by the boards of directors of both SVAC and Cyxtera. And it is expected to close in mid-2021, subject to customary closing conditions, including the receipt of regulatory approvals, and approval by SVAC’s stockholders. Upon closing of the proposed business combination, the name of Starboard Value Acquisition Corp. will be changed to Cyxtera Technologies, Inc.

KEY QUOTES:

“In 2017 we identified a huge opportunity – a premium portfolio of high-quality data center assets with the potential to become a leading global provider in the highly attractive retail colocation market. Nearly four years later, not only has our experienced team successfully deployed new core systems, a new salesforce and a new brand, we have implemented our strategy to provide deeply connected and intelligently automated infrastructure solutions to businesses around the world. Now, as a new Cyxtera enters its growth chapter, we’re thrilled to partner with Jeff Smith and the SVAC team. In addition to helping accelerate our growth along multiple vectors, Starboard’s deep expertise across corporate governance, operational excellence, and capital allocation will immediately benefit us as a public company, as we drive long-term value creation.”

— Manuel D. Medina, Executive Chair of Cyxtera and Founder and Managing Partner of Medina Capital

“At Cyxtera we’ve built a data center platform that’s ideally positioned to deliver the type of differentiated solutions that enterprises, service providers, and government customers require to meet their ever-changing infrastructure needs. By merging with SVAC, we are able to accelerate our plans to drive high-margin growth by increasing utilization of our existing assets, developing innovative product offerings, and expanding our global footprint. Our management team’s experience in successfully building and operating a publicly traded data center company with a significant presence in international markets ensures that the additional capital will be efficiently allocated to effectively build on our world-class platform, accelerate growth, and create long-term shareholder value.”

— Nelson Fonseca, CEO of Cyxtera

“Cyxtera is at an exciting inflection point, poised for significantly improved growth and profitability in an industry with powerful secular tailwinds. Cyxtera’s world-class team, led by Manny and Nelson, has built a high-performance, trusted, and reliable global platform, without losing their customer focus or passion for innovation. Cyxtera is exactly the kind of opportunity we were targeting when we created SVAC. We look forward to partnering with the Cyxtera and BC Partners teams to grow the Company and create value for our shareholders, employees, customers, and partners.”

— Jeff Smith, Chair of SVAC and CEO of Starboard

“As part of the original investment group that helped launch Cyxtera, we’ve been firm believers in the power of Cyxtera’s model and the Company’s growth potential since its founding. Cyxtera offers a powerful combination of a global platform in top-tier markets, a blue-chip customer base, innovative service offerings, and dynamic partner ecosystems. This merger with SVAC enhances the leadership team’s ability to deliver innovative solutions to clients and expands the scale of Cyxtera’s opportunity.”

— Fahim Ahmed, Partner at BC Partners

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.