The stock of InterXion Holding NV (NYSE:INXN) surged higher yesterday following its merger with British data centre provider Telecity Group. The latter released a press notice informing that it has entered into a non-binding and all-share merger agreement with cloud services provider, Interxion.
Are analyst calling INXN a long-term hold?
Compelling Synergies
As a result of this deal, shareholders of InterXion Holding NV (NYSE:INXN) will receive 2.3386 new Telecity Group shares for each share of Interxion. After computing the exchange rate, the deal translates into 15% premium over Interxion’s share price of $26.47 at the close of the business day on February 9, 2015. The Interxion shareholders will own 45% while Telecity shareholders will own 55% of the combined new group.
Telecity went ahead to inform the shareholders that they estimate nearly 600 million pounds as net present value of total synergies. The company added that the synergies would not reflect in its first full year earnings, bit will be accretive from the second year onwards. Telecity signaled to roll out a share buyback plan following the conclusion of the deal.
Increased Demand For Data Centre Service
According to the boards of both InterXion Holding NV (NYSE:INXN) and Telecity Group, the merger proposition looked very compelling. There is an upsurge in demand for data centre services as enterprises and digital applications are increasingly shifting to the cloud. Hence, the merged entity will be in a position to offer a broad range of products and solutions to the wide-ranging needs of customers.
InterXion Holding NV (NYSE:INXN)’s John Baker will be Deputy Chairman of the new group. Its CEO David Ruberg will be appointed as CEO of the combined entity, who will remain at helm for a period of one year following the completion of the transaction. Baker said that the deal will not only enhance the value for shareholders but will also lower the cost of capital and will give access to capital markets. The shares of InterXion Holding NV (NYSE:INXN) closed nearly 14% higher at $31.80.
Technicals
InterXion Holding NV (NYSE:INXN) is in a bull market for the last 3 years and the bullish momentum looks to be increasing. The stock has just broken above a major trendline resistance around $30 and if it can sustain above it, more upside can be expected soon enough. Technically though, the bulls need to break the long term channel on the upside, which contains the entire price action since 2012. Otherwise the probability of another corrective phase beginning soon can’t be negated.
