Equinix crashes Telecity's warehouse party, leaving bid door ajar

Lombard once visited a data centre and found it had a row of boulders along its frontage to deter ram raids by saboteurs. But it is a lot easier to gatecrash tie-ups between the security-conscious companies that run these server warehouses, as the US group Equinix looks set to prove. It has offered £2.3bn in cash and shares for Telecity, leaving the UK company little choice but to abandon its plans to purchase Interxion, a Dutch group of equal size, for £1.6bn.

Equinix's hard-driving boss Steve Smith disapproves of that transaction. Well he might. As Milan Radia of Jefferies points out, the deal would confine Equinix to "a distant number two spot in Europe". A company that services the world wide web needs a worldwide network of its own.

However, by disrupting Telecity's tie-in with Interxion, Mr Smith has increased the chances of a rival bidder pitching for the UK group. Telecity could fill in gaps on the European map for several other data centre operators, in addition to Equinix. Its prize asset is a data centre in Docklands that provides a low latency base for the servers of high-frequency securities traders.

For rivals of Equinix, such as Digital Realty of the US, another option is bidding for the jilted Interxion, rather than participating in a pricey auction of Telecity led by Goldman Sachs.

Telecity's four advisers, meanwhile, should be able to work out between them that the price of £11.45 a share offered by Equinix is a full one. It represents a forward earnings ratio of about 29 times. US data centre companies boast bigger multiples. But as Janet Yellen, the Federal Reserve chairwoman, has understatedly remarked, US equities are "quite high".

About 46 per cent of the consideration would be in Equinix's stock, the rest in cash. A takeover would both validate and conclude Telecity's bumpy career as an independent company, which began in the pioneering data labs of the University of Manchester. The company hosts processing power capable of launching rockets and supplying the world with videos of funny cats. But, absent a competing bid, saying yes to this offer should be a no-brainer for the board.

Mine host

Fictional mine owner Ross Poldark is not the only heartthrob to have made a bob or two from copper. Byronic boss Gavin Patterson has flogged £29m of the stuff, helping BT Group beat forecasts with headline earnings of £6.3bn in 2014-15. But what set investors' bodices heaving was an 18 per cent jump in the earnings of BT's consumer division.

That suggested Mr Patterson had not merely indulged a passion for football by blowing hundreds of millions on sports rights. The chance to see a selection of games has encouraged customers to sign up to BT Broadband. And more of them are sticking around to brave a service that can sometimes feel slower than an 18th-century hay wagon.

BT shares have risen 18 per cent since Mr Patterson succeeded Ian Livingstone as chief executive in September 2013. But three clouds on the horizon are as darkly brooding as Messrs Poldark and Patterson. First, the £12.5bn purchase of mobile operator EE will look expensive unless BT can prove that consumers want their telly and telecoms bundled. Second, BT is under pressure to lift stagnant sales. Third, Ofcom is to review BT's ownership of Openreach, the utility that gives most telcos access to customers' homes.

Openreach is a gold mine, in contrast to Poldark's Wheal Leisure, which yielded copper. The division produced 38 per cent of BT's 2015 profits. No wonder rascally wreckers such as Vodafone are urging Ofcom's Sharon White to split it off. There is a good case to do so - competition could benefit. If she proceeds, BT shares will retreat and Mr Patterson will really have something to smoulder about.

Commodities 101

Glencore boss Ivan Glasenberg has made a discovery. Apparently, supplying more of a product reduces its price if demand is constant. He has tried to share this insight with the likes of BHP Billiton and Rio Tinto. But they won't listen. Sam Walsh, the boss of Rio, might reasonably be expected to have independently identified the "Glasenberg Principle", as we shall call it, given that he has been in business for about 40 years. It is almost as if the two large, efficient miners don't mind taking a bit of pain, so long as weak prices hurt competitors more.

All most frustrating for Mr Glasenberg. According to one yarn, insult was recently added to injury when the South African-born tycoon told an Australian executive that holding a passport from the Lucky Country made him an Aussie himself. "It's good for a man to have an ambition," the Antipodean replied, conceding nothing.

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