Singtel and KKR spend US$1.3 billion on data centres stake

The companies said they will initially acquire S$1.75 billion (US$1.3 billion) worth of redeemable preference shares and warrants in ST Telemedia Global Data Centres, to give the business its full title. They will subsequently invest a further S$1.24 billion into the firm, once they have exercised the warrants in full.

On completion of the transaction, ST Telemedia – a Singaporean investment firm that focuses on communications and media, and infrastructure assets, as well as data centres – will continue to be STT GDC's majority shareholder. KKR and Singtel's investment will give them 18.3% of STT GDC with, according to Bloomberg, the former taking 14.1% and the latter 4.2%.

"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 companies said in a joint statement.

They also noted that STT GDC will use the proceeds to boost its position in its existing markets – it has operations in Singapore, the UK, Germany, India, Thailand, South Korea, Indonesia, Japan, the Philippines, Malaysia and Vietnam – and to support international expansion both organic and organic growth strategies. Or to put it another way, there could be an M&A announcement on the cards.

It seems KKR/Singtel beat off a fair amount of competition from other would-be investors. Most recently, Reuters named the pair as the frontrunners in the race for STT GDC, putting them ahead of investment firm Stonepeak, but Apollo Global Management and Blackstone have also been linked with the firm in recent months.

KKR and Singtel were always going to be in with a shout of securing the investment opportunity, all other things being equal. Singtel and ST Telemedia hail from the same stable; both are owned by Singapore's Temasek. And last year KKR bought into Singtel's own data centre operations, Singtel Digital InfraCo, picking up a 20% stake for S$1.1 billion (US$800 million).

"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," said David Luboff, Co-Head of KKR Asia Pacific and Head of Asia Pacific Infrastructure, KKR.

"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," added Arthur Lang, Group Chief Financial Officer of Singtel.

And Singtel is not the only one, as recent events in the data centres space demonstrate.

Microsoft announced the opening of its first cloud region of data centres in Spain to provide AI intelligence and cloud services to businesses and public bodies just last week as part of a broader $2.1 billion investment commitment in the country. And almost immediately tongues started wagging about more spend. According to Reuters, Microsoft will plough €6.69 billion, or just over $7 billion, into the development of even more new data centres in Spain over a 10-year period.

Elsewhere, New Zealand's Infratil shared details of a NZ$1.15 billion (US$707 million) equity raising to fund further investment into data centre operator CDC; Africa Data Centres secured 2 billion rand worth of funding, or around US$110 million, to help it grow its business; and earlier this month KDDI and Softbank both shared ambitious plans, albeit without disclosing investment levels, to build massive AI data centres on a former Sharp plant in Japan.

There is a lot of money sloshing about in the data centres space at present. Singtel, KKR and ST Telemedia claim their deal is the largest digital infrastructure investment in Southeast Asia so far this year. That may well be the case, but the way the wind is blowing, they may not hold that crown for very long.