Key points
- Digital Realty and Goodman now own 9.9% of NEXTDC
- Why NEXTDC's shares had fallen before the raid
- Why NEXTDC's board called the move opportunistic
Digital Realty (DLR) and Australia's Goodman Group have bought 9.9% of Australian data center operator NEXTDC (ASX: NXT), the two companies said in a joint release on Monday, November 9, in Sydney. They paid an average of A$9.22 a share through a vehicle they own 50:50.
Their substantial holder notice puts the stake at 75,215,528 shares. Added up from the notice's list of trades, the stake cost about A$694 million.
The two companies said they have no agreement on anything beyond the stake, and "no present intention of submitting a control proposal, or making a takeover offer for NEXTDC," but reserve the right to do so "should circumstances change." They said they look forward to a potential collaboration with NEXTDC's board on "the challenges facing the company."
NEXTDC's board sees it differently. It called the stake purchase "an opportunistic move" that came two weeks after the company cut its guidance. The board said it doesn't have a takeover proposal and would consider any bona fide approach on its merits. It has hired Barrenjoey and UBS as financial advisers.
Most of the stake came from an overnight book build
NEXTDC told the market on November 5 that the two companies ran an aftermarket book build on November 4, open only to institutional investors, seeking shares at A$9.50 each. NEXTDC shares had closed at A$6.53 that day, so the offer was about 45% above the market price.
The notice shows about 61.5 million shares bought on November 5, at prices up to A$9.50. It also lists about 7.7 million shares bought on the market on November 3 and 4, at A$5.995 to A$6.58, before the book build. Another 6 million came on November 6, at A$9.40 to A$10.40. The early purchases left the vehicle well under 5% of NEXTDC, the level at which Australian law requires a holder to disclose its stake.
| Date | Shares bought | Price range (A$) |
|---|---|---|
| Nov. 3 | 1.05 million | 5.995 to 6.27 |
| Nov. 4 | 6.65 million | 6.245 to 6.58 |
| Nov. 5 | 61.5 million | 9.07 to 9.50 |
| Nov. 6 | 6.0 million | 9.40 to 10.40 |
Source: Form 603 filed with the ASX on November 9, Annexure C. Totals rounded.
NEXTDC shares jumped 51% to A$9.85 on November 5 and closed at A$10.40 on November 6. They traded at A$9.84 at 10:42 a.m. Sydney time on Monday, November 9, down 5.4%.
A Melbourne power delay set it up
On October 21, NEXTDC cut its forecasts for the year to June 2027. The local grid operator, Jemena, suspended parts of the electricity network works needed for more power at NEXTDC's M3 Melbourne data center, citing community and stakeholder opposition. NEXTDC now expects that extra power in its 2028 fiscal year.
NEXTDC shares last closed at A$9.18 on October 16, before a trading halt that lasted until the announcement. They fell 42% to A$5.35 on October 21 and were at A$6.53 on November 4, the day of the book build. The A$9.50 offer was about 3% above the price before the guidance cut.
The company cut its underlying EBITDA forecast to A$245 million to A$265 million, from A$385 million to A$410 million, leaving out the delayed M3 contracts. It also paused projects that aren't backed by customer contracts. A week later, NEXTDC published its loan covenant figures and said it complied with both tests at June 30, with about A$8.7 billion of liquidity at September 30.
Local opposition to grid and data center projects is not only an Australian story. We follow votes on pauses and bans in the US on our data center moratorium tracker.
Digital Realty is a landlord buying into a rival
Digital Realty says it operates more than 300 data center facilities in more than 30 countries. It rents space and power to cloud companies and other tenants, the same business NEXTDC runs in Australia. We compared those landlords with their AI-cloud tenants in our look at Digital Realty and Equinix.
NEXTDC's next dates
NEXTDC holds its annual general meeting on November 20, and plans to announce the results of its spending review by then. NEXTDC expects the Victorian government's planning decision on later M3 stages only after the state election on November 28.
Cover photo: NEXTDC's P2 data center in Perth, by Samuel Wiki / Wikimedia Commons, CC0.
