Exclusive: Private equity consortium vies for CenturyLink data centres - sources

By Greg Roumeliotis and Liana B. Baker

(Reuters) - Four private equity firms have formed a consortium to bid on a data centre business that CenturyLink Inc, a U.S. provider of phone and internet services, is hoping to divest for more than $2.5 billion (1.88 billion pounds), people familiar with the matter said this week.

The move illustrates that private equity firms will still occasionally partner in so-called club deals when the amount of equity they need to raise for a leveraged buyout exceeds the commitments their funds and their investors can make.

Buyout firms GTCR LLC, Charlesbank Capital Partners LLC, Berkshire Partners LLC and Stonepeak Infrastructure Partners have teamed up in an effort to buy the data centres from CenturyLink, the people said.

CenturyLink has also held talks with other bidders, including companies active in the data centre sector as well as buyout firm BC Partners LLP, the people said. There is no certainty that the private equity consortium's bid will be successful, the people added.

The sources asked not to be identified because the negotiations are confidential.

"As we stated in our second-quarter earnings call in early August, our strategic review process continues to progress well and we expect to complete the process by the end of this year. We are exploring a full range of options including, but not limited to, a partnership or joint venture, a sale of all or a portion of the data centres, as well as keeping these assets as part of CenturyLink’s portfolio," CenturyLink said in a statement.

GTCR, Stonepeak and Charlesbank did not respond to requests for comment, while Berkshire Partners and BC Partners declined to comment.

Maintaining and upgrading its 59 data centres has been expensive for CenturyLink. The Monroe, Louisiana-based company announced last November that it would explore strategic options for its data centre and colocation business to free up cash for capital investments and to boost returns for shareholders.

Its colocation data centres provide space for customers to install servers and equipment that CenturyLink then helps support.

Data centre divestitures are difficult to complete because they involve separating assets that are deeply integrated into a telecommunications network. AT&T Inc unsuccessfully tried last year to sell data centres, while Verizon Communications Inc has also been trying this year to shed a data centre business.

"We believe the data centre sale would clearly enhance shareholder value, especially given the price these types of assets have commanded recently, and would like to see management move more decisively," Morningstar analyst Michael Hodel wrote in a research note on CenturyLink last month.

(Reporting by Greg Roumeliotis and Liana B. Baker in New York; Editing by Matthew Lewis)