Spark has sold 75% of its data centre operations to Australian Pacific Equity Partners in a deal that values the business at $705 million.
The telco will get $486m cash, with a further $98m - for a total $584m - in FY2027 if performance targets are hit.
The proceeds will go to paying debt, the company said in an NZX filing. Spark had net debt of $2.74 billion as of December 31, 2024.
Shares were flat at $2.61 in midday trading.
“It looks to be a good deal. The pricing is in line with where the market was broadly expecting it to be,” Craigs portfolio manager Mo Singh told the Herald.
“The market will like that Spark has got the deal done ahead of the result next week. This will give a bit of clarity to the dividend profile - which will clearly be reset lower.” The market consensus is for a full-year FY2026 dividend of 18 cents per share vs FY2025’s 25cps
The telco says the sale was at an operating earnings multiple of 38.8, FY2025, assuming ebitda of $22.9m for its data centre business. Spark will report its financials next week.
A separate company, currently with the holding name DC Co, will be spun out to run the data centre business. Spark will hold a 25% stake.
Spark plans to boost its data centre capacity from 23 megawatts today - a fraction of that offered by the likes of DCI, CDC and Microsoft locally - to 130MW, which would put it, or now DC Co, toe-to-toe with the tech giants.
In August 2024, Spark said it would explore options, including outside partners, to raise up to $1 billion for a five- to seven-year push to expand its data centre operations - a hot area with the rise of AI.
In February, the telco confirmed a process was under way.
The Sydney-based Pacific Equity Partners (PEP_ has more than A$14 billion ($15.4b) in funds under management. Its largely non-tech portfolio includes financial services and healthcare companies, Singapore Post’s Australian operation and fleet leasing. It has also owned and sold major New Zealand businesses, including the chicken company Tegel and biscuit maker Griffins.
PEP was also said to be interested in Fonterra’s consumer brands, although French firm Lactalis is now rumoured to be in exclusive negotiations.
At a half-year update in February, chairwoman Justine Smyth said Spark had a plan to expand to 130MW of data centre capacity - they are described by the peak power consumption - from its current 22MW from three centres, the largest of which is its recently expanded Takanini facility.
The expansion “will require $1b-plus of capex over the next five to seven years”, Smyth said. Spark was exploring equity funding options, “including capital partnerships”.
Expansion plans include the first stage of Spark’s planned 10MW data centre in a new surf park at Dairy Flat, north of Auckland. Surplus heat from the computer servers will heat a wave pool. Over time, it will be scaled up to a 40MW - easily the telco’s largest.
Spark won resource consent for its Dairy Flat build last year, but recently put in a revised application.
“This is a procedural resource consent application for a potential expansion of capacity at the site, should it be required in the future,” a spokeswoman told the Herald.
Scaling up to a total of 130MW capacity would put it on near level terms with half-Infratil-owned CDC’s hyperscale data centres in Hobsonville and Silverdale in Auckland’s north and northwest and Microsoft’s (completed), DCI (one completed, one under construction) and Amazon’s (under construction) facilities in the city’s northwest.
Recent Spark asset sales, including its passive mobile network infrastructure and a sell-down in the Southern Cross Cable network have gone to paying debt and returns to shareholders.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.