Publicly listed pre-fabricated modular data centre specialist DXN has sold its business to Flow2Edge Australia for $26 million.
DXN will use the proceeds from the transaction to repay its debts and make a distribution to its shareholders estimated to be the range of $0.011 to $0.013 per share, representing a estimated premium in the range of 88 per cent – 123 per cent on the three month average price of $0.006 as of 4 August.
DXN told shareholders the final distribution wasn’t certain as it depends on matters such as the time between announcing the transaction and completion, the ultimate cost of the transaction as well as repaying its $4 million debt facility.
The sale includes all DXN's business and assets including all shares in its subsidiaries TAS01, Secure Data Centre and all the units in SDC unit trust.
In a separate update to shareholders, DXN revealed the intention of the directors was to "wind up the company" and will provide a timetable once the transaction is complete.
The transaction is subject to conditions by the Foreign Investment Review Board and DXN shareholders, which will decide at a general meeting in late September.
DXN chairman John Baillie said it didn’t take the decision lightly.
“The transaction is not only a good offer, it also enables us to address the capital requirements for the business going forward,” Baillie said.
“Further it leverages the experience and footprint of the Flow Digital Infrastructure (DI). We are excited about the opportunities this will create for our customers in the medium to long term.”
Flow2Edge Australia is a part of Flow DI, with chairman Kris Kumar seeing it as an opportunity to expand its footprint and enhance its customer service capabilities.
“The acquisition will enable us to leverage DXN’s superior edge design and construction capabilities, allow us to control our supply chain and deliver edge as-a-service in the APAC [Asia Pacific] region,” Kumar said. “This is a key milestone for us as we continue to strategically invest in digital infrastructure to meet the rapidly growing demand across our markets.”
Along with Kumar, Flow DI was founded by investment firm PAG, which maintains US$2 billion in existing data centre investments.
Flow DI said it plans to invest US$10 billion in digital infrastructure in the next five to seven years.
In the meantime, DXN is seeking to raise $2.12 million to fund its working capital position until the sale completion date in November.
DXN was advised by TMT Partners as its financial advisor and Steinepreis Paganin as its legal advisor. Flow was advised by MA Moelis Australia as its financial advisor and King and Wood Mallesons as its legal advisor.
In March DXN saw profit after tax sink $3.88 million into the red as revenue jumped 61 per cent to $5.7 million in the first half of FY22 ending 31 December.
The company told shareholders that its Melbourne data centre legal dispute had been resolved, “eliminating a significant negative cash drain on the company and inventory housed in the facility was sold to Wingu Africa.”
The resolution incurred one-off expenses, which impacted margins in the first half.
DXN CEO Shalini Lagrutta told shareholders it produced a significantly improved performance in the first half of FY22, benefiting from the new edge-focused strategies implemented in the last financial year.
It has booked a record $7.9 million worth of new modular data centre contracts and added “significant blue-chip customers” to its portfolio across key market segments including mining, edge data centres and cable landing stations.
The company expects the modular data centre manufacturing business to maintain its strong sales momentum with new and repeat customer demand reflecting its edge data centre reputation in the market, Lagrutta said.
“DXN also expects to see growth in its data centre operations revenue through the recently acquired Darwin data centre, the introduction of new products and solutions across our data centre network and strategic partnership activity with DC Alliance’s Perth-based data centre, Pier DC,” Lagrutta said.
“We expect further growth in subsea cables within the region, as well as increases in automation in the resources sector and new applications of edge data centres.
“These will drive greater demand for DXN’s modules. As an Australian manufacturer, DXN is also positioned well for national opportunities in defence and subsea.”