Infratil Limited (Infratil) has executed a conditional agreement with HKT Trust and HKT Limited (HKT) to establish a strategic partnership to accelerate the growth of its Console Connect business (Console Connect).
Console Connect is a top-3 global software-defined interconnection platform offering next-generation automated connectivity solutions. The Console Connect platform makes connecting to data centers, partners, clouds, and other applications simple and secure, with fully automated switching and routing.
Console Connect owns its global IP network, which has been developed over many years and has been a top 10 Tier 1 network globally for the last 5 years, serving ~17% of all internet traffic and reaching over 150 countries. Integration with an owned Tier 1 IP network, as well as long-term integrated access to a global backbone network, provides a clear point of differentiation for Console Connect given its extensive network coverage and superior unit economics. Console Connect provided the network through Its company, PCCW. Marc Halbfinger is expected to be CEO of the new entity.
Infratil will initially acquire an 80% stake in Console Connect from HKT for US$160 million. Infratil will also enter into a strategic partnership with HKT, with both companies jointly investing up to US$295 million over a 2-year period following the completion of the acquisition to accelerate Console Connect’s growth through:
- Joint sales and marketing via an HKT-supported approach to offer critical fiber infrastructure and IP access to its existing and new enterprise and wholesale customers.
- Investment in new subsea cable systems and network development to increase Console Connect’s network capacity, resiliency, and reach.
- Continued investment in research and development (R&D) of Console Connect’s technology platform to expand and enhance its product offerings.
Following this initial period of growth investment, Infratil will own between 60 and 80% of Console Connect, with HKT holding the remainder. Ultimate ownership stakes will reflect the relative equity contributions of each party over this initial 2-year period. As the majority investor, Infratil will have governance rights consistent with its interests and, working alongside HKT, will continue to drive the development and growth of the business.
Infratil’s initial investment implies a 3.4x EV/FY2022A revenue multiple for Console Connect, with target returns of 15–25% over 10 years. The purchase price includes an earnout and is subject to usual completion adjustments for cash, net debt, and net working capital.
Infratil CEO, Jason Boyes, said the investment in Console Connect builds Infratil’s presence in Asia and is complementary to its digital infrastructure investments globally, which include CDC Data Centers, One NZ, Kao Data in the United Kingdom, and Clearvision Ventures in the US.
“Console Connect is a leading global software-defined interconnection platform, and this acquisition is a continuation of our conviction in the tailwinds of the digital infrastructure sector. It enables us to invest in building a next-generation platform to support underlying growth in the demand for digital infrastructure and global connectivity solutions by enterprise and wholesale users”.
“Our partners in HKT have built a highly attractive software-defined interconnection platform over the past several years, and we look forward to investing alongside them to accelerate the growth of Console Connect”.
HKT’s Group Managing Director, Susanna Hui, said: “Over the past few years, the team at Console Connect has successfully developed it into a world-leading platform. We are pleased to have found a like-minded partner in Infratil who is excited about the potential opportunities to continue growing Console Connect. Our partnership around Console Connect, investing in the platform as a standalone operation, will deliver material benefits to the business as well as to HKT shareholders through unlocking value and further developing economies of scale.”
Completion of the acquisition is conditional on telecommunication, foreign investment regulatory approvals and merger approvals in Australia, France, Germany, Greece, Hong Kong, Italy, Japan, Mozambique, the Netherlands, Singapore, South Africa and the USA. Assuming those approvals are granted, completion is currently expected by Q3 2024.