Exclusive: BC Partners in lead to acquire CenturyLink's data centers - sources

October 11, 2016 3:49 PM EDT

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By Liana B. Baker and Greg Roumeliotis

(Reuters) - Buyout firm BC Partners Ltd is in pole position to acquire a data center business that CenturyLink Inc, a U.S. provider of phone and internet services, is hoping to divest for more than $2.5 billion, people familiar with the matter said.

BC Partners emerged as the lead bidder after another private equity consortium comprising GTCR LLC, Charlesbank Capital Partners LLC, Berkshire Partners LLC and Stonepeak Infrastructure Partners, which was also pursuing the assets, broke apart without any deal reached, the people said this week.

The sale process has been complicated by leases that CenturyLink has with Digital Realty Trust Inc, a company which rents out data centers, making a deal with BC Partners uncertain, the people said.

The sources asked not to be identified because the negotiations are confidential.

"As we stated in our second-quarter earnings call in early August, our strategic review process continues to progress well and we expect to complete the process by the end of this year," CenturyLink said in a statement.

BC Partners declined to comment and Digital Realty could not immediately be reached for comment.

Data center divestitures can be difficult to complete because they involve separating assets that are deeply integrated into a telecommunications network. AT&T Inc abandoned its plans last year to sell its data centers over similar issues.

CenturyLink has about 59 colocation data centers that provide space for customers to install servers and equipment that the company then helps support.

Reuters reported in January that one of CenturyLink's peers, Verizon Communications Inc, was also seeking to divest its colocation portfolio of 49 data centers.

Cowen Group research analyst Colby Synesael published a note on Oct. 5 stating that a sale of Verizon's data centers was imminent and that Equinix Inc was the most likely acquirer.

A source familiar with the matter said Equinix was indeed in talks to acquire these assets from Verizon. Equinix and Verizon declined to comment.

Both companies are shedding assets that were acquired in deals in 2011 at a time when owning data centers was seen as attractive for telecommunications firms. CenturyLink bought data hosting company Savvis for $2.5 billion, while Verizon spent $1.4 billion on another data center company, Terremark Worldwide, that year.

Private equity firm Silver Lake Partners is exploring a sale of Vantage Data Centers Management Co LLC in a deal it hopes will value the U.S. company at well in excess of $1 billion, including debt, sources said on Monday.

(Reporting by Liana B. Baker in San Francisco; and Greg Roumeliotis in New York; Additional reporting by Malathi Nayak in New York; Editing by Lisa Shumaker)

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