NEW YORK (The Deal) -- Equinix (EQIX) is attempting to overturn the merger of TeleCity and InterXion (INXN) by opening talks with TeleCity about a cash-and-share offer worth more than 2.3 billion pounds ($3.5 billion).
The tentative proposal is worth 1,145 pence a share, London-based TeleCity said, and breaks down into about 54% cash and 46% stock. Investors would get a 27.3% premium to Wednesday's close should the new approach succeed.
TeleCity shares jumped 19%, or 170.50 pence, to 1,070 pence in midmorning London trading. Equinix stock was up $4.72, or 1.8%, at $263.00 in New York at around 10:36 a.m. EDT Thursday.
The trans-Atlantic offer would dash an agreed pan-European acquisition of New York Stock Exchange-listed Interxion by TeleCity.
That $2.2 billion agreement, agreed in principle in February and formalized on March 9, prohibited both TeleCity and Interxion, which is based in the Netherlands, from considering competing offers, except when doing so would interfere with board-level responsibility for considering shareholder interests.
"The board of TeleCityGroup has determined that it is required by virtue of its fiduciary duties to enter into discussions with Equinix and has decided to permit Equinix to undertake a short period of due diligence," the company said. "At this stage, there can be no certainty that any offer will ultimately be made for TeleCityGroup, or as to the terms on which any offer would be made."
Equinix, a Redwood City, Calif. based operator of data centers, said an acquisition of TeleCity would allow it to bolster existing European operations in locations such as London while providing needed expansion into capitals such as Dublin, Helsinki, Istanbul, Milan, Stockholm and Warsaw.
TeleCity's move on Interxion had surprised analysts, who had seen TeleCity as a target after its CEO of 10 years, Michael Tobin, resigned unexpectedly in August. Financial investors and data-center operators are eager for the start of an expected consolidation in Europe as economies recover and as companies increasingly turn to the cloud, which allows users to tap data and programs anywhere and on nearly any device.
Equinix said U.K. takeover regulations require it to make an offer for TeleCity no later than June 4.
Interxion acknowledged the approach in its own release and noted that the new talks also freed it from its exclusivity commitments, possibly making it a target once more as well.
"Interxion continues to believe that the pending merger with TeleCityGroup is a strategically compelling combination that delivers meaningful value to Interxion and TeleCityGroup shareholders as well as their customers," Interxion said.
Interxion CEO David Ruberg was to have retained his position in the expanded company for the first 12 months and had hinted that the company could eventually splash out to expand.
The TeleCity/Interxion combination carries a 15 million-pound breakup fee.