Telecity plans LSE float despite volatility

TelecityGroup, one of Europe's largest independent data centre operators, has revealed plans to list the company on the London Stock Exchange next month, flying in the face of the current stock market turmoil.

This month, the huge flotation of the Russian aluminium giant Rusal was pulled because of market volatility, while in the tech sector, SmartStream has cut the price of its IPO by one third to reflect a more cautious market.

Nevertheless, management at Telecity said the time was right to bring the data centre business back to the market, given the surge in demand for capacity on the back of rising broadband penetration and use of online media on sites like YouTube. Mike Tobin, the Telecity chief executive, said: "The business is robust. This is the right time for us. We are not at the beck and call of the market."

Mr Tobin said the company would look to raise between £100m and £125m via the listing, £60m of which will be used to fund the construction of two new data centres in London and Amsterdam. He expects the flotation to value Telecity between £400m and £500m and noted than none of the company's owners is selling out of the company.

Telecity was listed on the stock exchange but was taken private in a £58m deal in 2005, when 3i took over the struggling company. Early in 2006, Telecity acquired Redbus Interhouse, a key rival. Both businesses were founded in the run-up to the tech boom and invested heavily in building data centres on the expectation that demand for storage and capacity would blossom.

The data centre sector hit hard times in the wake of the dot.com bubble bursting and a round of consolidation took place among distressed rivals. Recently, demand has outstripped supply as consumers have started to use the sophisticated online services that were envisaged at the turn of the century.

Mr Tobin said the company, which counts the BBC, Sony and Virgin Radio among its customers, would benefit from being a listed company again because of its raised profile. It will join the main index as opposed to the junior market, AIM, where most technology floats are launched.

Telecity's CEO, who has been with the business since 2002, said the listing would provide the company with more financial muscle in pursuing further consolidation opportunities. He said Telecity is keen to bulk up in its core markets where demand is strongest, namely London, Amsterdam and Paris.