Windstream To Sell Data Center Business For $575 Million (Updated)

Windstream Corp. announced Monday (Oct. 19) it has entered into a definitive agreement with TierPoint of St. Louis to sell the Little Rock telecom’s data center business in an all cash deal worth $575 million.

As part of the deal, Windstream will establish an ongoing reciprocal strategic partnership with TierPoint, allowing both companies to sell their respective products and services to each other’s prospective customers through referrals. Windstream said the strategic agreement will allow it to focus capital on its core telecom offerings while continuing to offer traditional data center services to enterprise customers across a broader data center footprint.

“Data center services will remain an integral component of our enterprise service offering.” said Tony Thomas, president and CEO of Windstream. “We expect the divested data center business to continue its significant growth under the leadership of TierPoint, and we look forward to partnering closely with them to provide advanced data center services to our enterprise customers.”

“This is a great strategic fit for TierPoint and our customers,” said Jerry Kent, chairman and CEO for TierPoint. “Windstream Hosted Solutions and its employees have earned a reputation for providing excellent customer service and innovative enterprise-class solutions.  We value these team members as a key asset in the acquisition and their expertise adds to our strength and focus on providing a superior level of customer care. We’re also very pleased to enter into a long-term strategic partnership with Windstream, allowing both companies to leverage the expertise and respective strengths of our organizations.”

In June 2014, Sequel Data Centers LLC, the parent company of TierPoint LLC, was acquired by an investor group that included the Stephens Group LLC, led by Little Rock financier Witt Stephens Jr. and sister Elizabeth Campbell.

Under new ownership and management, privately-held TierPoint has been expanding its national portfolio of data centers across the U.S. in the past 15 months, snapping up its eighth acquisition with financial backing from the investor group. Today, the St. Louis-based cloud computing provider and data center operator runs 13 Tier III plus data centers in Washington, Texas, Oklahoma, Pennsylvania, Maryland, New York, Massachusetts and Connecticut.

The deal with Windstream comes almost exactly two months after a DealReporter.com report on Aug. 13 that said the Arkansas Fortune 500 telecom was seeking to sell its nationwide division that offers cloud and managed services solutions, causing the company’s stock to temporarily jump above $7 a share.

Originally, when Windstream purchased the Hosted Solutions business in late 2010, it operated five state-of-the-art data centers in Raleigh, N.C.; Charlotte, N.C.; and Boston, and served more than 600 customers. According to the company’s website, Windstream’s Hosted Solutions division now has a nationwide network of 27 data centers in 16 U.S. cities, including a 30,000 square foot state-of-the-art facility in Little Rock on Chenal Parkway that opened in April 2012.

In the news release announcing the deal, company officials said the data centers sold to TierPoint posted losses of $2 million on revenue of $30 million in the second quarter. On Aug. 6, Windstream posted a loss of $111 million, or $1.13 per share, compared to net income of $14 million, or 13 cents per share, a year ago. Total revenue for the quarter was essentially flat at $1.42 billion, compared to $1.47 billion a year ago.

The boards of both companies have approved the transaction, which is expected to close within the next 2-4 months, subject to customary conditions and approvals.

Ahead of Monday’s opening bell, Windstream’s shares (NASDAQ: WIN) were trending higher at $7.18 per share, up 34 cents or 5%. Over the past year, the company’s stock has traded in the range of $4.42 and $16.65 per share. The Little Rock-based Fortune 500 telecom is expected to report its third quarter financial results on Nov. 5.