PE Firm Said Exploring Competing Bid for Interxion (INXN) Amid Post-Deal Angst - Sources

With the support of certain shareholders, a private equity firm is said to be exploring a competing bid for Interxion (NASDAQ: INXN), which has seen its shares drop sharply since announcing a stock-for-stock merger with Digital Realty (NYSE: DLR) in October, according to sources.

At the time of the deal announcement, the takeover was worth approximately $93.48 per share to Interxion shareholders. However, with the subsequent drop in Digital Realty’s stock, the deal is now worth approximately $83.07 per share. Shares of Interxion were trading at $88.67 before the deal announcement and now trade at $83.12. In fact, the stock was $83.08 before rumors of a deal were reported on Oct. 10.

While Interxion has yet to file its proxy to reveal the background of the merger, a Digital Realty proxy showed that Interxion talked to eight other potential bidders including a sovereign investment fund, global asset managers and public and private companies in the data center business, prior to deciding that the Digital Realty stock-for-stock deal was the best way to maximize shareholder. However, analysts and some investors aren’t convinced Interxion conducted a thorough enough sales process.

Given the post-deal decline and potential lack of a full auction of the company, at least one private equity firm is said to be crunching the numbers again, which could result in a superior proposal. It is unclear if the unnamed firm will follow through with the offer, which may trigger a $72.6 million reverse termination fee payable to Digital Realty.

Absent a competing bid, shareholders may look for a sweetened deal from Digital Realty, which is the natural suitor for the company and had held on-again-off-again talks with Interxion since March 2016, or about one year after the TelecityGroup takeover of Interxion was terminated.

At a Citigroup conference Tuesday, Digital Realty said it sees the deal closing in the spring, a little sooner than expected, and expects a shareholder vote in mid-to-late February. This means another suitor has to act quickly if they plan on mounting a competing offer.

Interxion offered no comment on speculation of a competing bid.

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