Global Switch deal smooths Chelsfield MBO
Sunday 20 July 2003
Chelsfield, the property company at the centre of management buyout talks, is this week expected to announce the partial sale of its data centre business for £100m.
Morley Fund Management will take a 25 per cent stake in Chelsfield's Global Switch, which has been hit by the downturn in the technology market. The deal will help smooth the way for a £2bn buyout of Chelsfield, led by chairman Elliott Bernerd.
Last week HBOS emerged as one of Mr Bernerd's backers. The bank is in negotiations to provide 15 per cent of the £500m equity needed to fund the deal. It is expected that as a result of the buyout, Nina Wang, one of Asia's richest women and owner of 12.3 per cent of Chelsfield, will sell out completely.
HBOS is also in talks to help finance the £1.5m in debt needed for the buyout. But the bank is understood to be lukewarm about keeping Global Switch, which was set up by Andy Ruhan, the entrepreneur who is involved in the acrimonious takeover of shell company Izodia. Chelsfield took control of Global Switch in March 2002 after buying a stake owned by Canadian property group TrizecHahn.
But Global Switch has suffered from the collapse of some of its tenants, notably telecoms companies Global Crossing and KPNQwest. In March, Chelsfield reported that Global Crossing contributed a loss and write- downs of £36.8m in 2002.
Global Switch is still loss making but there are signs it is beginning to turn the corner. The company operates eight data centres, including the former FT print works site in London's Docklands. The centres provide space for companies to house their communications equipment.
While Europe was flooded with data centres during the technology boom, there are signs that supply has reduced and demand is increasing. It is understood that, in the next few weeks, Global Switch will announce a crop of new lettings, including deals with IBM and Shell.
Morley had originally planned to buy out Global Switch for around £400m. But after nine months of negotiations, talks broke down in January.
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