Equinix to buy Switch & Data; DirecTV vote ahead; Shamrock shakes up Texas Industries board

By Stephanie N. Rotondo

Portland, Ore., Oct. 22 - Equinix Inc. announced it will acquire Switch & Data Facilities Co. Inc. in a cash-and-stock deal.

Under the terms of the deal, Equinix will pay $689 million, 80% of which will be stock and 20% will be in cash. Market analysts speculated that the deal will get done, calling it a good acquisition.

Meanwhile, Liberty Media Inc. and DirecTV Group, Inc. set the date for a shareholder vote on the planned merger of DirecTV with Liberty Entertainment Inc.

Shamrock Activist Value Fund LP won three seats on Texas Industries Inc.'s board of directors, bringing an end to a fight between the fund and the company. Shamrock had previously informed the board that it was looking to shake things up due to what it considered poor performance on the board's part.

Investors returned to the market as better earnings and forecasts helped to erase concerns about the economy.

The Dow Jones Industrial Average - which fell below the 10,000-mark on Wednesday - regained some strength, earning 131.95 points, or 1.33%, to end at 10,081.31. The Nasdaq Composite was also better, increasing 14.56 points, or 0.68%, to 2,165.29. The Standard & Poor's 500 index improved by 11.51 points, or 1.06%, to 1,092.91.

Equinix to acquire Switch & Data

Equinix announced that it will acquire Switch & Data in a cash-and-stock deal valued at $689 million.

According to the terms of the merger, Switch & Data shareholders can choose to receive either 0.19409 shares of Equinix stock or $19.06 in cash for each share of Switch & Data stock. The overall structure of the deal will be 80% stock and 20% cash. Should shareholders elect for more than 80% of Equinix stock, the consideration will be prorated to achieve the 80%/20% goal.

"The strategic acquisition of Switch & Data by Equinix further strengthens Equinix's position as the most comprehensive global data center services provider across North America, Asia-Pacific and Europe," Steve Smith, president and chief executive officer of Equinix, said in a press release announcing the deal. "Our complementary business models, coupled with Switch & Data's broad North American market coverage, provide a platform for strong growth as well as an opportunity to accommodate our customers' demands for additional services."

"For more than a decade, Switch & Data has provided colocation and data center services to support the needs of the world's leading online brands," added Keith Olsen, president and CEO of Switch & Data. "These businesses rely on Switch & Data to provide secure locations for them to connect and safeguard their mission-critical applications. The combination of Switch & Data's North American site footprint and Equinix's global reach will increase our addressable market, enhance our customers' value, and drive incremental value to our stockholders."

Chad Bartley, an analyst with Pacific Crest Securities, said that the business combination should be a "smooth integration."

"It's two very similar companies, producing very similar services," he said.

The deal will also allow Equinix to enter into new markets and increase capacity in existing markets, he noted.

"Generally, I think it is a good acquisition," Bartley said. As far as the price of the transaction, he agreed that the terms were fair.

"It's a fair premium, but I don't think it's very expensive," he said.

The deal is expected to close in the first quarter of 2010.

Equinix's equity fell $3.63, or 3.71%, to $94.12, while Switch & Data's stock gained $3.70, or 25.69%, to $18.10.

Equinix is based in Forest City, Calif. Switch & Data is based in Tampa, Fla.

Liberty, DirecTV investors to vote

Liberty Media's shareholders will be asked to vote on a proposed spinoff of its Liberty Entertainment subsidiary at a special stockholder meeting on Nov. 19.

At the same time, shareholders will get the chance to vote on a merger between the spinoff and DirecTV.

DirecTV will also hold a meeting on Nov. 19, asking shareholders to approve the deal.

As previously reported, DirecTV announced the plan to combine businesses back in May.

Under the terms of the deal, holders of Liberty Entertainment's series A and B common stock will receive 1.1111 shares of DirecTV class A common stock per share held. DirecTV shareholders will then receive one common share per share held.

El Segundo, Calif.-based DirecTV will also provide up to $650 million in term loan funds to service Englewood, Colo.-based Liberty Entertainment's debt.

DirecTV's equity gained 26 cents, or 0.97%, to close at $27.13. Liberty Entertainment's shares also improved, by 16 cents, or 0.51%, to finish at $31.72.

DirecTV provides digital multichannel television entertainment, and Liberty Media is an entertainment company.

Shamrock gains Texas Industries seats

Texas Industries' shareholders "made it clear that they desired change" at the company by appointing all three of Shamrock Activist Value Fund's board nominees, the fund said in a press release.

The nominees - Marjorie L. Bowen, Dennis A. Johnson and Gary L. Pechota - won their seats on the nine-member board by a four-to-one margin, according to preliminary calculations.

In June, Shamrock had informed Texas Industries that it intended to nominate three people to the company's board, with the hope of making changes to leadership.

Shamrock met with the company's top executives to discuss the problems the fund was looking to change, but according to an Aug. 4 letter sent to the company's board, that meeting did not go well.

"We hoped a meeting would allow for substantive discussions about our three director nominees, our concerns regarding Texas Industries' poor record of performance versus its peers, and our ideas as to how to improve both management and director accountability," said the letter from Shamrock to the board.

"However, it quickly became apparent that Mr. [Robert D.] Rogers [chairman and former CEO] had a different agenda. While we understand that the board did not authorize Messrs. [Mel G.] Brekhus [CEO] and Rogers to meet with us, we thought it important that the board directly learn of the meeting and its substance unfiltered by Mr. Rogers."

The letter went on to state that "Mr. Rogers made it abundantly clear that he believes there is no place in the Texas Industries boardroom for the voices of its shareholders. This is an unfortunate paternalistic view toward shareholders. Mr. Rogers and his current board behave as if only they know, and only they are capable of acting in, the best interests of the company and its shareholders. This simply underscores Mr. Rogers' misplaced belief that Texas Industries is his own personal fiefdom."

In announcing the board shake-up Thursday, Johnson, as managing director of Shamrock Capital Advisors, said the election of the new board showed that shareholders want change.

"We believe that this resounding endorsement by our fellow shareholders provides a mandate to immediately seek to restore accountability and to change the status quo at Texas Industries," Johnson said in a statement. "All of us are committed to working cordially and collaboratively with management and with our fellow directors to implement the corporate governance changes approved by the shareholders today, as well as other appropriate corporate governance improvements. We look forward to the opportunity to build value for the benefit of all Texas Industries shareholders."

Shamrock Activist Value Fund owns a 10.2% equity interest in Texas Industries, a Dallas-based construction materials company.

Texas Industries' stock increased by $1.09, or 2.71%, to $41.36.

Adobe tender for Omniture shares expires

Adobe Systems Inc. subsidiary Snowbird Acquisition Corp.'s $21.50-per-share tender offer for all outstanding shares of Omniture Inc. expired on Thursday.

Though there was no official word on the results of the tender prior to press time, many market players expect the deal will be completed.

"I expect it to go through as planned," said Pacific Crest Securities' Bartley. Another analyst, who preferred to remain anonymous, said the merger is "a good deal for both sides."

The deal is valued at $1.8 billion and is expected to close in the fourth quarter.

Adobe's stock moved up by 36 cents, or 1.03%, to $35.17, while Omniture's gained 3 cents, or 0.14%, to $21.48.

Adobe is a business and mobile software and services company based in San Jose, Calif., and Orem, Utah-based Omniture develops online business optimization software.

Mentioned in this article:

Adobe Systems Inc. Nasdaq: ADBE

DirecTV Group, Inc. Nasdaq: DTV

Equinix Inc. Nasdaq: EQIX

Liberty Entertainment Inc. Nasdaq: LMDIA

Omniture Inc. Nasdaq: OMTR

Switch & Data Facilities Co. Inc. Nasdaq: SDXC

Texas Industries Inc. NYSE: TXI

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