Equinix (EQIX) Eyes Expansion in Africa With MainOne Buyout

Equinix, Inc. EQIX intends to expand in Africa through the acquisition of data center and connectivity solutions provider, MainOne. The acquisition, which is expected to close in the first quarter of 2022, will mark a pivotal entry point for Equinix into the African market.

Reflecting positive sentiments, shares of Equinix have risen 2.3% since the announcement of the news.

The acquisition seems a strategic fit for Equinixas MainOne enjoys a strong presence in Nigeria, Ghana and Côte d'Ivoire. Nigeria is Africa's largest economy and together with Ghana, it’s become an established data center hub. MainOne offers enabled connectivity for the business community of Nigeria, and has digital infrastructure assets comprising three operational data centers. It has an additional facility under construction, which is expected to open in the first quarter 2022.

This all-cash transaction bears an enterprise value of $320 million and is expected to be accretive to adjusted fund from operations upon closure, excluding integration costs. The completion of the transaction will also add more than64,000 gross square feet of space to Platform Equinix and  570,000 square feet of land for future expansions.

Equinix’s efforts to bolster its presence in Africa will add scale and strengthen its position in the region, while helping it benefit from the robust growth of data consumption.

Per management, “MainOne's infrastructure, customer relationships, partner ecosystem and operating capability will extend the reach of Platform Equinix and bolster opportunities for customers in Africa and throughout the world."

Equinix remains well-poised to bank on the robust demand in the data center space with its Platform Equinix, which comprises more than 237 data centers across 65 metros.

Solid growth in cloud computing, the Internet of Things and big data, and a greater call for third-party IT infrastructure are spurring the demand for data-center properties. Moreover, growth in artificial intelligence, autonomous vehicle and virtual/augmented reality markets is anticipated to be robust over the next five to six years.

However, the increased competition could prompt rivals to resort to aggressive pricing policies, making Equinix vulnerable to pricing pressure.

Shares of Equinix have gained 14% year to date, underperforming the industry's growth of 21.3%. EQIX currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Stocks to Consider

Some stocks worth considering from the REIT sector are OUTFRONT Media OUT, Cedar Realty Trust CDR and CubeSmart CUBE.

The Zacks Consensus Estimate for OUTFRONT Media’s 2021 fund from operations (FFO) per share has been raised 13.8% over the past two months. OUT’s 2021 FFO per share is expected to increase 45.71% from the year-ago reported figure.

OUTFRONT Media flaunts a Zacks Rank of 1 at present. Shares of OUT have rallied 9.9% in the past six months.

The Zacks Consensus Estimate for Cedar Realty’s current-year FFO per share has been raised 2.6% to $2.36 in the past month. Over the last four quarters, CDR’s FFO per share surpassed the consensus mark twice and missed the same in the other two, the average surprise being 6.4%.

Currently, CDR sports a Zacks Rank of 1. Shares of Cedar Realty have appreciated 46.5% in the past six months.

CubeSmart carries a Zacks Rank #2 (Buy) at present. Over the last four quarters, CUBE’s FFO per share surpassed the consensus mark on all occasions, the average surprise being 7.10%.

The Zacks Consensus Estimate for CubeSmart’s 2021 FFO per share has been revised marginally upward in the past week to $2.10. Shares of CUBE have inched up 4.1% in the past six months.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.