8-5-2024 (SINGAPORE) Private equity investors and asset managers on a global scale are gearing up for a wave of mergers and acquisitions (M&A) and substantial investments linked to data centres in the Asia-Pacific region, propelled by the surge in demand for digital infrastructure amid the artificial intelligence (AI) revolution.
The robust flurry of deals in the world’s most populous region reflects the response of countries and corporations to the escalating demand for AI, necessitating greater data capacity, industry insiders revealed.
According to data from LSEG, Asia Pacific, including Japan, has spearheaded M&A activities in the global data centre market this year, with M&A value reaching US$840.47 million, surpassing half of the global total. In 2023, the region witnessed record-breaking data centre deals amounting to $3.45 billion, as reported by the global financial markets infrastructure and data provider.
This year’s tally is poised to exceed previous records, with several substantial transactions on the horizon. Notably, various financial sponsors, including the renowned investment powerhouse Blackstone Inc, are eyeing the acquisition of AirTrunk, which boasts 11 hyperscale data centres across Australia and the wider region, sources familiar with the matter disclosed.
Sources revealed that AirTrunk’s owners, Macquarie Group and Canada’s Public Sector Pension Investment Board (PSP), are aiming to value the business at up to $9.8 billion, potentially marking Asia’s largest data centre transaction this year. However, AirTrunk, Blackstone, Macquarie, and PSP refrained from commenting on the matter.
“The AI revolution is generating an unprecedented surge in demand for high-quality data centre capacity,” remarked Garren Cronin, managing director of Cadence Advisory, which facilitated Australian data centre operator NEXTDC’s $861 million capital raising in April. Cronin further added, “The projected new capacity required to be built in Asia Pacific over the next three to five years is truly staggering. I anticipate that deal flow in the data centre space will intensify in 2024.”
Microsoft Corp recently announced plans to invest $2.2 billion over the next four years in Malaysia to expand its cloud and AI services across Asia, underscoring the burgeoning significance of data centre investments in the region.
The surge in data centre investments mirrors a trend seen in the U.S. and Europe, with tech giants such as Amazon, Microsoft, Alphabet Inc, and Meta Platforms rapidly enhancing their AI capabilities. Microsoft, for instance, unveiled plans to establish its inaugural Asian data centre in Thailand, following an announcement of $1.7 billion worth of investments in AI and cloud facilities in neighbouring Indonesia.
Further potential deals in Asia include Indonesia’s state-owned Telkom Indonesia’s anticipated sale of a stake in its data centre business valued at $1 billion and Japan’s NEC considering a $500 million data centre sale, as reported by news outlets.
Ahmad Reza, Telkom Senior Vice President of Investor Relations, disclosed to Reuters that Telkom is exploring strategic partnerships to enhance its data centre business arm NeutraDC’s capabilities and market reach. Meanwhile, NEC refrained from commenting on market speculation.
US investment firm Bain Capital is reportedly seeking credit financing for the international assets of data centre operator Chindata and investments for its China business. Bain Capital, which orchestrated Chindata’s privatization from the Hong Kong bourse in a $3.16 billion deal last year, opted not to provide comments.
Goldman Sachs Asset Management (GSAM), which previously invested in AirTrunk before selling its stake to a Macquarie-led consortium, has deployed over $1 billion towards data centre development in Asia over the past three years. Nikhil Reddy, head of APAC real estate at GSAM, emphasized the critical role of capacity amid the AI-driven surge in data consumption. Reddy highlighted, “AI creates a different type of need for data centres beyond the historic demands of the cloud focused on low latency. Now with AI, which entails massive data consumption, capacity is key.”
