Blackstone and CPP Investments Acquire AirTrunk From Macquarie and PSP Investments
Blackstone funds and Canada Pension Plan Investment Board (CPP Investments) have bought Asia Pacific data centre platform AirTrunk from Macquarie Asset Management (MAM) and the Public Sector Pension Investment Board (PSP Investments) in a A$24bn (€14.6bn) deal.
MAM and PSP Investments have sold their 88% stake in AirTrunk. In addition to this, AirTrunk’s founder and CEO, Robin Khuda, will also sell a portion of his shares.
Khuda, who established AirTrunk in 2015, will remain with the company as the CEO.
MAM and PSP Investments acquired a majority stake in AirTrunk in 2020. Since then, the company has expanded from five data centres in Australia, Singapore and Hong Kong, to become a leading hyperscale data centre specialist across 11 sites, including Japan and Malaysia.
The deal on behalf of funds managed by Blackstone Real Estate Partners, Blackstone Infrastructure Partners, Blackstone Tactical Opportunities, and Blackstone’s private equity strategy for individual investors, represents Blackstone’s largest investment in the Asia Pacific region.
Jon Gray, president and COO of Blackstone, said: “AirTrunk is another vital step as Blackstone seeks to be the leading digital infrastructure investor in the world across the ecosystem, including data centres, power and related services.”
Sean Klimczak, global head of Blackstone Infrastructure and Nadeem Meghji, global co-head of Blackstone Real Estate, said: “Prior to AirTrunk, Blackstone’s portfolio consisted of US$55bn (€49.8bn) of data centres including facilities under construction, along with over US$70bn in prospective pipeline development.”
Max Biagosch, senior MD, global head of real assets and head of Europe for CPP Investments, said: “This investment represents another milestone in our broader data centre strategy, further enhancing our footprint in the region to the benefit of CPP contributors and beneficiaries.”
Ani Satchcroft, co-head of infrastructure for Asia Pacific at MAM, AirTrunk’s majority investor, said: “Our journey with AirTrunk, and the drive and foresight of our teams in Asia Pacific, has resulted in AirTrunk expanding its footprint across key markets in the region, achieving a more than eightfold increase in contracted capacity.”
Sandiren Curthan, MD and global head of Infrastructure investments at PSP Investments said the partnership delivered outstanding results for and validated the pension plan’s investment strategy of focussing on partnering with top-tier management teams and like-minded investors to support infrastructure businesses globally in their growth.
AirTrunk’s valuation of over A$24bn includes the cost of planned construction projects.
Scott Murdoch of Reuters aslo reports Blackstone to buy Australia's AirTrunk in US$16 billion deal:
Blackstone will buy Australian data centre group AirTrunk for an implied enterprise value of over A$24 billion ($16.10 billion), it said on Wednesday, in what would be Blackstone's largest investment in the Asia Pacific region.
The alternative asset manager, along with the Canada Pension Plan Investment Board (CPP Investments), is acquiring AirTrunk from Macquarie Asset Management (MAM) and the Public Sector Pension Investment Board (PSP).
The transaction needs approval from the Australian Foreign Investment Review Board (FIRB), given the asset is being bought by overseas parties.
At $16.1 billion, the deal is the largest buyout in Australia this year and one of the biggest in recent history.
Global private equity investors and asset managers are readying for billions of dollars worth of M&A and investments linked to data centres in Asia Pacific, as the artificial intelligence (AI) boom fuels demand for digital infrastructure.
The value of AirTrunk increased during the sales process, which officially began in March, due to the increasing usage of AI which requires greater data centre capacity.
CPP Investments said in a statement on Wednesday it would hold 12% of AirTrunk once the deal was finalised.
"CPP Investments has invested in the Asia Pacific data centre sector for several years, and we have witnessed significant growth in this space, fueled by a strong demand for digital infrastructure and, more recently, the increasing adoption of artificial intelligence," said Max Biagosch, CPP Investments' global head of real assets.
AirTrunk, which was founded in Sydney in 2015, is considered the largest data centre group in Asia Pacific, with 11 sites in Australia, Japan, Malaysia, Hong Kong and Singapore.
It was owned 88% by MAM and Canada's PSP which have now sold their entire stake, according to a statement from the two companies.
AirTrunk founder and chief executive Robin Khuda will retain a stake, the statement said, without specifying the size of his remaining shareholding. Khuda will remain chief executive, according to the statement.
"AirTrunk is another vital step as Blackstone seeks to be the leading digital infrastructure investor in the world across the ecosystem, including data centers, power and related services," Blackstone president Jon Gray said in a statement.
Blackstone and CPP Investments beat out a consortium led by IFM Investors which also bid for AirTrunk, Reuters reported on Aug. 28.
Reuters reported on Monday the Blackstone led group was nearing a deal to win control of AirTrunk.
Blackstone to buy Australia’s AirTrunk in A$24 billion deal:
Blackstone Inc. has agreed to acquire Australian data-center operator AirTrunk in a deal valuing the firm at A$24 billion ($16.1 billion), including debt and capital expenditure for committed projects.
The New York-based alternative asset manager, along with Canada Pension Plan Investment Board, is buying AirTrunk from Macquarie Group Ltd. and PSP Investments, according to a statement Wednesday. The transaction is pending regulatory approval by the Australian Foreign Investment Review Board.
The acquisition is Blackstone’s biggest-ever investment in the Asia-Pacific region, outweighing its A$8.9 billion takeover of Australian casino operator Crown Resorts Ltd. in 2022. It’s also one of the biggest in digital infrastructure deals globally this year.
“AirTrunk is another vital step as Blackstone seeks to be the leading digital infrastructure investor in the world,” Blackstone President and Chief Operating Officer Jon Gray said in the statement.
Assets such as data centers, mobile phone towers and fiber networks have become popular targets for investors, given their stable returns and strong growth prospects as humanity becomes increasingly reliant upon technology.
Bloomberg News reported Monday that Blackstone was nearing a deal to buy AirTrunk for more than A$20 billion. The firm, which has been in debt-financing talks with banks, emerged as the buyer after competing with a consortium that included DigitalBridge Group Inc., Global Infrastructure Partners, IFM Investors Pty and Silver Lake Management, according to people familiar with the matter.
AirTrunk operates data centers in Australia, Singapore, Hong Kong, Japan and Malaysia, according to its website. A group led by Macquarie’s infrastructure arm took control of the company in 2020 in a deal that valued it at about A$3 billion, Bloomberg reported at the time. Prior to that, it was owned by investors including Goldman Sachs Group Inc.’s special situations division.
Paul Smith and Anthony MacDonald of The Australian Financial Review report on AirTrunk’s $23.5b AI pay day:
AirTrunk founder Robin Khuda has cemented his billionaire status after clinching the sale of his nine-year-old data centre business to Blackstone in a deal valuing the company at A$23.5 billion which highlights the wealth created by the artificial intelligence boom.
The New York-headquartered asset management giant beat a consortium led by industry superannuation fund money manager IFM Investor to buy AirTrunk from Mr Khuda and Macquarie.
The deal, first reported by The Australian Financial Review’s Street Talk column, was being finalised late on Tuesday evening. Sources close to the transaction said Mr Khuda will take home more than $500 million in cash and retain a stake in AirTrunk of about the same value. He will remain as chief executive.
The businessman, who arrived in Australia from Bangladesh to attend university when he was 18, sold 88 per cent of the company to Macquarie’s infrastructure arm and Canada’s PSP Investments at the start of 2020. He kept a 10 per cent share of the business.
After yesterday’s sale, Mr Khuda’s stake in AirTrunk has been reduced to 5pc, and is worth more than $500 million after the company’s debt is factored in, sources close to the transaction said. Mr Khuda, Blackstone and AirTrunk declined to comment.
Macquarie’s fund and PSP will sell their AirTrunk stakes in full. The deal triggers a large performance fee for ASX-listed Macquarie Group, which manages the fund. The fee is expected to be worth hundreds of millions of dollars.
The deal is easily the biggest corporate transaction in Australia this year, and the fifth largest ever after Block paid $39 billion for buy now, pay later group Afterpay in 2021, the $33 billion sale of Westfield to Unibail-Rodamco in 2018, the $32 billion acquisition of Sydney Airport by a consortium of superannuation investors in 2022 and the $26 billion merger of gold miners Newmont and Newcrest last year.
Blackstone bid alongside the Canada Pension Plan Investment Board, while the IFM consortium included NYSE-listed DigitalBridge, Global Infrastructure Partners, California’s Silver Lake and Abu Dhabi’s MGX.
It is the biggest data centre deal globally. The sector has boomed as technology giants including Amazon and Google seek more processing power and space to house growing artificial intelligence platforms and cloud computing operations.
Prior to AirTrunk, the largest data centre deal came in 2022, when KKR and GIP bought US-based CyrusOne for $US15 billion ($22 billion).
“It’s amazing to have a local Australian-founded company achieve that outcome. Data centres are usually dominated by Americans,” said David Yuile, managing director of Global Data Centre, an ASX-listed company which owns a small stake in AirTrunk.
Blackstone and CPPIB will take control of AirTrunk’s growing portfolio of Asian data centres, which are occupied by companies including Google, Amazon Web Services, Microsoft and TikTok’s parent company ByteDance.
After raising $400 million from investors including Goldman Sachs and TPG-owned TSSP to build its first Sydney and Melbourne data centres in early 2017, AirTrunk has gone on to own 11 across Australia, Singapore, Hong Kong, and Malaysia.
Blackstone will need to pour plenty of capital into AirTrunk after the sale. It already has plans for three more data centres in Sydney, Hong Kong and Osaka. Customers are also increasingly expecting operators to find ways to improve efficiency and reduce the huge amount of power required to train and run AI systems.
“Robin built AirTrunk based on the idea that you can build the shell of a data centre fairly quickly, and then all of these big customers bring all of their own equipment, but AI is changing the model a bit,” said one person close to the transaction, who spoke on condition of anonymity as they were not authorised to comment publicly.
“There is a real test for AirTrunk because what it has done to date is not going to get it where it needs to be in terms of data centres needing more energy, more cooling, more density. Everything is changing.”
Blackstone has made data centres a priority investment category globally. In July, Blackstone’s chief executive Stephen Schwarzman compared the impact of AI to Thomas Edison patenting the electric light bulb, saying the related investment opportunities were “unprecedented”.
At the time he said Blackstone had a data centre portfolio of $US55 billion. It spent $US10 billion to buy data centre operator QTS in 2021, and last December, signed a $US7 billion joint venture with specialist Digital Realty to develop four hyperscale data centre campuses in Frankfurt, Paris and Northern Virginia.
“Current expectations are that there will be approximately $US1 trillion of capital expenditures in the United States over the next five years to build and facilitate new data centres, with another $US1 trillion of capital expenditures outside the United States,” Mr Schwarzman said.
Industry analysts agreed that demand for data centres is going to keep growing for the foreseeable future. They warned operators would face higher costs as they tried to modify designs to address growing concerns about excessive power consumption.
“We’re seeing rapid advances in AI, automation and quantum technologies igniting an urgent need for greater data centre capacity to support these modernisation efforts,” Gartner analyst Adrian Wong said. “The large number of Australian organisations expected to deploy generative AI within the next year, will see most turning to the cloud providers to support the [digital] workloads.”
ASX investors, meanwhile will be trying to assess how AirTrunk’s sale will affect prices of related stocks. The most obvious is NextDC, where Mr Khuda was once chief financial officer. NextDC operates 13 data centres across Australia and is valued at $9.94 billion. Macquarie Technology Group operates five and is valued at $2.02 billion.
Australia’s biggest listed real estate investor, Goodman Group, has also emerged as a player in the sector, shifting its focus from warehouses towards data centres. These centres now account for more than 40 per cent of its $13 billion in development projects.
Last week, NextDC chief executive Craig Scroggie said AirTrunk’s sale was unlikely to lift valuations for similar businesses because it would be impossible for investors to make a judgement without a detailed look at the private company’s books.
NextDC shares rose 0.8 per cent to $16.56, while Macquarie Technology was down 1.1 per cent to $78.46. Global Data Centre shares rose almost 7 per cent.
Earlier today, CPP Investments issued a press release announcing an investment in Asia pacific data operator AirTrunk:
Sydney (September 4, 2024) – Canada Pension Plan Investment Board (CPP Investments) today announced that it has entered into a definitive agreement alongside Blackstone to acquire AirTrunk, a leading Asia Pacific data centre operator, from Macquarie Asset Management and other investors including PSP Investments. CPP Investments will commit to acquire a 12% interest in AirTrunk, as part of a transaction which values the business at an implied enterprise value of over A$24 billion1.
Founded in 2015 and headquartered in Australia, AirTrunk develops and operates data centres across the Asia Pacific region, including Australia, Hong Kong, Japan, Malaysia and Singapore.
“CPP Investments has invested in the Asia Pacific data centre sector for several years, and we have witnessed significant growth in this space, fueled by a strong demand for digital infrastructure and, more recently, the increasing adoption of artificial intelligence. We have built up strong sector expertise and are excited about the opportunities presented by data centres globally,” said Max Biagosch, Senior Managing Director, Global Head of Real Assets & Head of Europe for CPP Investments.
CPP Investments currently has data centre joint ventures and investments in key hubs in Asia Pacific, including Australia, Hong Kong, Japan, Korea, Malaysia and Singapore, as well as the U.S.
“We are delighted to partner with Blackstone and the AirTrunk management team to continue growing the business,” Biagosch added. “This investment represents another milestone in our broader data centre strategy, further enhancing our footprint in the region to the benefit of CPP contributors and beneficiaries. It is also a great example of close collaboration across the Fund, with our Infrastructure and Real Estate teams working together seamlessly to underwrite this investment.”
The transaction is subject to approval from the Australian Foreign Investment Review Board.
About CPP Investments
Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 22 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At June 30, 2024, the Fund totalled C$646.8 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Instagram or on X @CPPInvestments.
For their part, Macquarie Asset Management and PSP Investments also issued a press release announcing the sale of AirTrunk:
Sydney, Australia, 4 September, 2024 – Macquarie Asset Management (MAM) and The Public Sector Pension Investment Board (PSP Investments) today announced an agreement for the sale of the entirety of their respective interests totaling 88% of AirTrunk, to a consortium of investors led and managed by Blackstone. As part of the transaction, AirTrunk Founder and Chief Executive Officer, Robin Khuda, will also realise part of his stake. The transaction implies an enterprise value* of over $A24 billion.
MAM (on behalf of its managed fund and clients) and PSP Investments acquired a majority stake in AirTrunk in 2020. Since then, the company has expanded from five data centres in Australia, Singapore and Hong Kong, to become a leading hyperscale data centre specialist across 11 sites, including Japan and Malaysia. Capacity across the portfolio has grown from 450MW to over 1.8GW, with a strong future growth pipeline.
Ani Satchcroft, Co-Head of Infrastructure for Asia Pacific at AirTrunk’s majority investor, MAM, said: “The AirTrunk story is one of genuine partnership between MAM, PSP Investments and AirTrunk’s world class team. Our journey with AirTrunk, and the drive and foresight of our teams in Asia Pacific, has resulted in AirTrunk expanding its footprint across key markets in the region, achieving a more than eightfold increase in contracted capacity. Today’s transaction demonstrates MAM’s ability to identify, invest in, and nurture digital infrastructure assets that are resilient, scalable and pivotal in meeting today’s burgeoning demand for data, cloud services and the adoption of artificial intelligence.
“As the world’s largest infrastructure manager, MAM began investing in digital infrastructure more than 20 years ago. We remain committed to leveraging our global expertise and local insights to continue growing businesses and actively shaping industries, generating superior value for our investors and the communities we serve,” Ms Satchcroft said.
Sandiren Curthan, Managing Director and Global Head of Infrastructure Investments at PSP Investments said: “Our successful collaboration with MAM and the AirTrunk management team has enabled AirTrunk to become a market-leading independent hyperscale data centre platform in Asia Pacific from a customer experience, operational and sustainability standpoint.
“This partnership has not only delivered outstanding results for our beneficiaries but also validates our investment strategy focused on partnering with top-tier management teams and like-minded investors to support infrastructure businesses globally in their growth ambitions while achieving operational excellence,” Mr Curthan said.
MAM and PSP Investments have also worked alongside AirTrunk management to elevate its ESG and work health and safety (WHS) focus, with the company introducing initiatives including a sustainability linked loan – the largest by a data centre operator globally - a target of achieving 100% renewable energy by 2030 through both AirTrunk and customer procurement, and a safety culture that is leading in the industry.
Robin Khuda, who will remain with the company as the CEO, said: “In 2015, I established AirTrunk to pioneer scalable and sustainable hyperscale data centres in the Asia-Pacific region. In under a decade, we’ve built the largest platform in the region, with data centres in all major markets operating as essential digital infrastructure underpinning the digital economy.
“Today’s announcement is a testament to the strength of our platform, vision, execution and team – the experts and innovators, trusted by our customers to deliver and operate, with a passion to ensure sustainability is at the forefront of the finance, design, build and operations of our data centres.
“The support and expertise from MAM and PSP Investments have been transformational for the company. As we enter our next phase of growth, the AirTrunk management team thank them for their outstanding partnership. For AirTrunk, this is just the beginning, as we continue to capture the significant opportunities from the region’s vibrant digital future,” he said.
*Including capital expenditure for committed projects.
About Macquarie Asset Management
Macquarie Asset Management is a global asset manager, integrated across public and private markets. Trusted by institutions, governments, foundations and individuals to manage approximately $A938.3 billion in assets, we provide a diverse range of investment solutions including real assets, real estate, credit and equities & multi-asset. Macquarie Asset Management is part of Macquarie Group, a diversified financial group providing clients with asset management, finance, banking, advisory, and risk and capital solutions across debt, equity and commodities. Founded in 1969, Macquarie Group employs over 20,600 people in 34 markets and is listed on the Australian Securities Exchange. All figures as at 31 March 2024.About PSP Investments
The Public Sector Pension Investment Board (PSP Investments) is one of Canada’s largest pension investors with $264.9 billion of net assets under management as of March 31, 2024. It manages a diversified global portfolio composed of investments in capital markets, private equity, real estate, infrastructure, natural resources, and credit investments. Established in 1999, PSP Investments manages and invests amounts transferred to it by the Government of Canada for the pension plans of the federal public service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. Headquartered in Ottawa, PSP Investments has its principal business office in Montréal and offices in New York, London and Hong Kong. For more information, visit investpsp.com or follow us on LinkedIn.AirTrunk
AirTrunk is a hyperscale data centre specialist creating a platform for cloud, content and large enterprise customers across the Asia-Pacific & Japan (APJ) region. The company develops and operates data centre campuses with industry leading reliability, technology innovation and energy and water efficiency. AirTrunk’s unique capabilities, designs and construction methodologies allow it to provide customers with a scalable and sustainable data centre solution at a significantly lower build and operating cost than the market. A private company, AirTrunk is well capitalised to fund its development of data centres across the APJ region. For more information on AirTrunk, visit www.airtrunk.com.
This is a huge deal. Digital infrastructure remains a very hot area and the proof is Blackstone, the world's premiere alternatives investor, wants to be the leader in this space.
On this deal, Blackstone tagged along CPP Investments, one of its biggest global investors, to co-invest alongside it.
Once completed CPP Investments will own 12% of the company now valued at A$24 billion.
As AFR reports above, Blackstone and CPPIB will take control of AirTrunk’s growing portfolio of Asian data centres, which are occupied by companies including Google, Amazon Web Services, Microsoft and TikTok’s parent company ByteDance.
The article also notes that Blackstone will need to pour plenty of capital into AirTrunk after the sale. It already has plans for three more data centres in Sydney, Hong Kong and Osaka. Customers are also increasingly expecting operators to find ways to improve efficiency and reduce the huge amount of power required to train and run AI systems.
Big Tech is spending big money to lead the way in AI and big alternative investment funds are jumping on the digital infrastructure bandwagon.
Over the weekend, news broke that Microsoft, Apple, and NVIDIA will reportedly bail out OpenAI from the shackles of bankruptcy, pushing the ChatGPT maker’s market valuation to over $100 billion.
Let there be no doubt, there's a huge bubble going on in AI and the valuation of OpenAI reflects this. It's beyond obscene but shows you just how much Microsoft and other tech giants want to be leaders in the AI space.
This insane competition is breeding more demand for digital infrastructure and Blackstone wants to capitalize on it.
On the flip side, PSP Investments, Macquarie Asset Management and Robin Khuda are cashing out of AirTrunk but not completely for Mr. Khuda who retains a 5% stake and remains CEO of the company.
Macquarie is going to collect huge performance fees and it and PSP will make solid gains on their stake in the company (together they owned 88% but not sure about PSP's stake).
Interestingly, a year ago, Bisnow reported that AirTrunk was weighing a potential initial public offering that would value the company at $6.4B.
In one year the company's valuation skyrocketed.
And now it's up to Blackstone to inject the needed capital to take this company to the next level.
I'm sure Jon Gray and his team already have a road map in place and are looking to grow this company nicely in Asia Pacific so it remains a leader in that region.
Again, this is a huge deal, the Blackstone consortium won out against very big players in this space, demonstrating the strong demand to own AirTrunk.
It's mind-boggling the amount of money being thrown into hyperscale data centres but clearly Blackstone CEO and co-founder Stephen Schwarzman is a huge believer that this is only the beginning and data centres will grow exponentially over the next decades.
He may be right but speaking with top people in the AI field, I'm a little more cautious and think demand will cool off over the next three to five years.
We shall see but for now, this is a great deal for all parties involved, especially AirTrunk founder Robin Khuda who is now a billionaire.
Not bad for a businessman who arrived in Australia from Bangladesh to attend university when he was 18 and sold 88% of the company to Macquarie’s infrastructure arm and PSP Investments at the start of 2020, keeping a 10% share of the business.
Good for him, love these success stories.
Below, Australian data centre company AirTrunk, has just been sold for A$23.5 billion to private equity giant Blackstone. It's a landmark deal that Wilson Asset Management analyst Sam Koch says will have ramifications for the data centre industry in Australia, and globally. He says the success of the business shows Australia can punch above its weight in the sector.
And Robin Khuda, an entrepreneur originally from Bangladesh, has emerged as Australia’s latest billionaire after orchestrating one of the nation’s most monumental business transactions. He founded AirTrunk, a data center company, less than ten years ago, and it is now being sold for an impressive $23 billion.
AirTrunk's swift expansion was driven by the growing need for cloud storage solutions, especially with the rise of artificial intelligence technologies. The acquisition by Blackstone, a leading financial firm based in New York, marks a significant return for Macquarie, which had previously valued AirTrunk at $3 billion. Khuda still holds a 5% ownership in the company, securing his billionaire status.
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