ST Telemedia Global Data Centres (STT GDC), a data centre colocation services provider; global investment firm KKR; and local telecommunications technology group Singapore Telecommunications Z74 (Singtel) jointly announced the signing of definitive agreements, under which a KKR-led consortium of KKR (on behalf of funds managed by it) and Singtel will invest $1.75 billion in STT GDC.
This transaction marks the largest digital infrastructure investment in Southeast Asia to date in 2024.
The transaction comprises an initial $1.75 billion investment by the consortium via redeemable preference shares (RPS), with detachable warrants. Upon exercise of the warrants in full, the consortium will invest an additional $1.24 billion.
Under the agreement, Singtel will subscribe for $400 million in RPS and be issued detachable warrants. Singtel has also entered into an investor rights agreement with STT GDC, KKR and STT Communications, the parent company of STT GDC, to govern the relationship between the shareholders of STT GDC.
The RPS accrues dividend at a rate of 6.5% per annum or 7.75% per annum (if any dividend is not paid in cash and deferred on any dividend payment date). The warrants are exercisable, in whole or in part at any time prior to the seventh anniversary of completion of the proposed investment, into ordinary shares in the share capital of STT GDC representing 4.2% of STT GDC's issued share capital on a fully-diluted and as-converted basis as at the issue date.
Upon the exercise of the warrants in its entirety, Singtel will invest an additional $284 million into STT GDC. Assuming that Singtel exercises all of its warrants, the total consideration payable towards the subscription of RPS and exercise of all the warrants is $684 million.
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The consortium was selected following an independent competitive process by STT and STT GDC, which considered, among other things, the consortium’s collective expertise and track record, financial strength, and proposed business strategy. The proceeds of the investment will be used to further advance STT GDC’s position in the markets it operates in, and to support its continuing international expansion and growth plans through organic and inorganic strategies.
Following the transaction, ST Telemedia continues to be the majority shareholder of STT GDC.
Headquartered in Singapore, STT GDC is one of the world’s fastest-growing data centre providers with more than 95 data centres across 11 geographies and points of presence in over 20 major business markets. It provides critical services including high-quality colocation, connectivity, and round-the-clock support services. Today, its data centre portfolio has a total combined capacity of more than 1.7GW of IT load.
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KKR is making this investment from its Asia Pacific Infrastructure Investors II Fund. This follows KKR’s announcement at the Indo-Pacific Partnership for Prosperity to mobilize infrastructure in the Indo-Pacific region, and marks KKR’s latest digital infrastructure investment in Southeast Asia and globally. Past investments in Southeast Asian digital infrastructure have included: Nxera, a Singapore-headquartered data centre platform serving Asia Pacific; Pinnacle Towers, a digital infrastructure platform in Asia with a strong focus on the Philippines; and OMS Group, a leading neutral subsea telecommunications cable services provider.
Singtel is a leading provider of connectivity, digital services and digital infrastructure, with data centres a critical part of the business. In September 2023, KKR acquired a 20% stake in Nxera, Singtel’s regional data centre business. This announcement comes hot off the heels of Nxera announcing that it has entered into a joint venture with Malaysia’s TM to develop data centres in Johor.
Singtel sees tremendous growth opportunity in the fast growing data centre business. Rapid digitalisation combined with artificial intelligence is expected to accelerate global demand for data centre services. The proposed investment presents the Singtel with a unique opportunity to capitalise on these growth trends while providing certain downside protection.
This also represents an expansion of Singtel collaboration with KKR, to increase the group’s exposure towards the growing demand for data centre services and the robust market dynamics driving the sector. Singtel expects to fund the total consideration with internal cash resources.
Bruno Lopez, president and group CEO of STT GDC, says: “We are thrilled to welcome KKR and Singtel, two blue-chip investors in the digital infrastructure space into the STT GDC group. Since our inception 10 years ago, STT GDC has developed into a leading data centre provider with a significant footprint in Asia, UK and Europe, supporting the growth of the world’s largest cloud and enterprise customers. With the industry experiencing unprecedented cloud and AI-led growth, this strategic partnership with KKR and Singtel will be a significant catalyst for STT GDC's next chapter of growth as a leader in the digital infrastructure industry.”
David Luboff, co-head of KKR Asia Pacific and head of Asia Pacific infrastructure, KKR, says: “Data centres serve as an important backbone of the digital infrastructure that enables an increasingly digital economy and many critical industries globally. Our investment in STT GDC is a rare opportunity to support the growth of a leading data centre platform with a terrific track record of growth and significant potential, whilst deepening our existing collaboration with Singtel. Together, we look forward to leveraging our global network and expertise investing in digital infrastructure to power STT GDC’s continued success and international expansion, and to help it to achieve its next phase of transformation.”
Arthur Lang, group CFO of Singtel, says: “We see digital infrastructure, particularly data centres, as a growth asset and compelling investment with the remarkable rise of the sector driven by rapid digitalisation and AI adoption around the world. Given our joint expertise in digital infrastructure, we are pleased to participate in this fundraising with KKR, deepening our relationship since its investment in our regional data centre arm Nxera last September. This is a solid opportunity for Singtel to gain exposure to an established platform with a footprint in high-quality data centre markets and aligns with our Singtel28 strategy to further scale our digital infrastructure business in collaboration with like-minded partners.”
Stephen Miller, president and group CEO of ST Telemedia, says: “Since founding STT GDC, we have steadfastly supported its evolution and growth. Today’s announcement marks another important milestone for STT GDC with the introduction of two new marquee investors to enhance its global growth strategies. As a strategic investor and shareholder, STT looks forward to working closely with our new partners to propel STT GDC in its exciting next phase of global growth.”
Shares in Singtel closed at $2.58 on June 18.
