Item 8.01. Other Events
As previously disclosed, on
Following the filing of the Proxy Statement, as of the date of this Current
Report on Form 8-K, seven complaints have been filed in federal courts in
The plaintiffs in the Stockholder Litigation seek various remedies, including preliminarily and permanently enjoining the defendants from proceeding with the Merger unless the defendants disclose allegedly material information that was allegedly omitted from the Proxy Statement, rescinding the Merger in the event that it is consummated or awarding rescissory damages, directing the defendants to disseminate a proxy statement that does not contain any untrue statements of material fact and that states all material facts required in it or necessary to make the statements contained therein not misleading, declaring that defendants violated Sections 14(a) and/or 20(a) of the Exchange Act and the related rules and regulations thereunder, awarding costs, including attorneys' and expert fees, and granting such other and further relief as the court may deem just and proper.
The Company believes that the claims asserted in the Litigation Matters are without merit and no supplemental disclosure is required under applicable law. However, in order to avoid the risk of the Litigation Matters delaying or adversely affecting the Merger and to minimize the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing, the Company has determined to voluntarily supplement the Proxy Statement as described in this Current Report on Form 8-K. Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, the Company specifically denies all allegations in the Litigation Matters that any additional disclosure was or is required.
These supplemental disclosures will not affect the merger consideration to be
paid to
Supplemental Disclosures to the Proxy Statement in Connection with the Litigation Matters
The following disclosures in this Current Report on Form 8-K supplement the disclosures contained in the Proxy Statement and should be read in conjunction with the disclosures contained in the Proxy Statement, which in turn should be read in its entirety. All page references are to the Proxy Statement and terms used below, unless otherwise defined, shall have the meanings ascribed to such terms in the Proxy Statement.
The disclosure in the section entitled "The Merger" under the heading "Background of the Merger", beginning on page 31 of the Proxy Statement, is hereby amended by:
Adding the following sentence following the final sentence of the fifth paragraph on page 31:
Each non-disclosure agreement with each of those 11 parties contained customary standstill provisions that would automatically terminate upon the entry by the Company into a definitive acquisition agreement with a third party and other customary provisions.
Adding the following sentences following the final sentence of the second paragraph on page 33:
The composition of the Committee was determined based on a variety of factors, including, among other things, the directors' respective roles on the Board and their respective experience, qualifications, attributes and skills. The Board did not determine that any of the directors could not serve on the Committee. The Board retained responsibility for oversight of the process and did not delegate any exclusive authority to the Committee. The Committee regularly updated the Board with respect to material developments in the process.
Adding the following new paragraph following the fourth full paragraph on page 41:
None of the Company's directors or executive officers engaged in any material discussions or negotiations regarding any potential agreement, arrangement or understanding with KKR, GIP, Parent or any of their affiliates, or any other potential acquiror described above, in connection with the process described above, regarding such person's employment, or providing for any compensation or benefits to such person, following the closing of an acquisition of the Company.
The disclosure in the section entitled "The Merger" under the heading "Opinion of the Company's Financial Advisor", beginning on page 48 of the Proxy Statement, is hereby amended by:
Amending and restating the final paragraph on page 50, under the sub-heading "-Discounted Cash Flow Analysis", as follows (with new text underlined):
Morgan Stanley also calculated a range of implied terminal enterprise values of
the Company as of
Amending and restating the first full paragraph on page 51, under the sub-heading "-Discounted Cash Flow Analysis", as follows (with new text underlined and deleted text marked with a strikethrough):
Morgan Stanley then discounted the estimated Unlevered Free Cash Flow and range
of estimated terminal values derived to present value as of
Adding the following sentence and table following the first sentence of the fourth full paragraph on page 51, under the sub-heading "-Analysts' Price Target Analysis":
The following table reflects the publicly available price targets for shares of common stock published by such equity research analysts during 2021 (excluding one price target published in March 2021):
Equity Research Analyst Date of Report Price Target Citi September 22, 2021$ 79.00 Jefferies September 13, 2021$ 88.00 Deutsche Bank September 12, 2021$ 82.00 Wolfe September 12, 2021$ 75.00 Morgan Stanley September 8, 2021$ 80.00 Cowen August 31, 2021$ 78.00 Barclays August 25, 2021$ 78.00 BMO August 23, 2021$ 83.00 TD Securities August 19, 2021$ 88.00 RBC August 15, 2021$ 82.00 Credit Suisse July 30, 2021$ 81.00 JP Morgan July 29, 2021$ 76.00 Stifel July 29, 2021$ 85.00 Truist July 29, 2021$ 75.00 Wells Fargo July 29, 2021$ 80.00 Berenberg July 29, 2021$ 83.00 Raymond James July 29, 2021$ 82.00 Bank of America July 28, 2021$ 90.00 UBS July 28, 2021$ 70.00 Moffett July 28, 2021$ 70.00
Adding the following sentence and table following the first sentence of the sixth full paragraph on page 51, under the sub-heading "-Net Asset Value":
The following table reflects the publicly available NAV estimates for shares of common stock published by such equity research analysts during 2021:
Equity Research Analyst Date of Report Price Target Jefferies September 13, 2021$ 92.60 BMO August 23, 2021$ 67.87 TD Securities August 19, 2021$ 72.80 Bank of America July 28, 2021$ 62.50 KeyBanc July 28, 2021$ 59.00 UBS July 28, 2021$ 78.05
Amending and restating the first bullet point of the third paragraph on page 52, under the sub-heading "-Comparative Public Trading Multiples Analysis", as follows (with new text underlined):
· the aggregate value for each such company (obtained by calculating the sum of
equity market capitalization of such company plus the net debt of such company and other applicable adjustments such as adjustments for preferred stock and minority interests) as a multiple of its estimated calendar year 2022 EBITDA (based on Capital IQ consensus estimates for the selected companies and the Company, and also the 2022 Adjusted EBITDA estimate from management of$667 million for the Company) (referred to as "AV / 2022E EBITDA"); and
Adding the following paragraph and table following the second bullet point of the third paragraph on page 52, under the sub-heading "-Comparative Public Trading Multiples Analysis":
The following table presents these metrics for each of the selected companies and the Company:
Selected Companies AV / 2022E EBITDA P / 2022E FFO CoreSite Realty Corporation 25.2 x 26.0 x Digital Realty Trust, Inc. 23.6 x 22.2 x Equinix, Inc. 24.8 x 38.1 x Switch Inc. 20.1 x 20.1 x CyrusOne Inc. 19.5 x 17.3 x
Adding the following sentence following the first sentence of the seventh paragraph on page 52, under the sub-heading "-Precedent Transaction Analysis":
The precedent transactions analysis consisted of two separate analyses - a precedent premiums paid analysis and a precedent data center transactions analysis, each of which is described in detail below.
Amending and restating the two tables on page 53, under the sub-heading "-Precedent Premiums Paid Analysis", to add the "Premium Paid to Unaffected Price" column, as follows:
Digital Infrastructure Precedents Transaction Premium Paid to Announcement Unaffected Date Acquiror Target Price Blackstone REIT Operating Partnership; The Blackstone Group QTS Realty June 7, 2021 Inc. Trust, Inc. 23.7 % InterXion October 29, 2019 Digital Realty Trust, Inc. Holding N.V. 14.2 % Digital Colony Partners / EQT Zayo Group May 8, 2019 Infrastructure IV Fund Holdings, Inc. 15.2 % REIT Precedents Transaction Premium Paid to Announcement Unaffected Date Acquiror Target Price April 29, 2021 Realty Income Corporation VEREIT, Inc. 18.8 % October 27, 2019 Prologis, L.P. Liberty Property Trust 20.4 % Brookfield Asset Management Forest City Realty July 31, 2018 Inc. Trust, Inc. 24.8 % DCT Industrial Trust April 29, 2018 Prologis, Inc. Inc. 20.2 % GGP Inc. (nka: November 13, Brookfield Property Partners Brookfield Property REIT 2017 L.P. Inc.) 14.0 % Plum Creek Timber Co. November 8, 2015 Weyerhaeuser Company Inc. 18.9 % Blackstone Real Estate BioMed Realty Trust Inc. Advisors; Blackstone Real October 8, 2015 Estate Partners VIII, L.P. 28.5 % American Realty Capital Properties, Inc. (nka: Cole Real Estate October 23, 2013 VEREIT, Inc.) Investments, Inc. 18.4 %
Amending and restating the two tables on page 54, under the sub-heading "-Precedent Data Center Transactions Analysis", to add the "LTM EBITDA Multiple" and "NTM EBITDA Multiple" columns, as follows:
Selected Transactions LTM EBITDA NTM EBITDA Acquiror Target Multiple Multiple Blackstone REITOperating Partnership ; The Blackstone Group Inc. QTS Realty Trust, Inc. 27.6 x 24.9 x EQT Infrastructure IV Fund EdgeConneX, Inc. ~22.0 x -(1) Macquarie Asia Infrastructure Fund 2 AirTrunk Operating Pty Ltd -(1) 33.3 x Digital Realty Trust, Inc. InterXion Holding N.V. 25.5 x 22.3 x Digital RealtyTrust, Inc. ,Brookfield Infrastructure Ascenty LLC -(1) 15.3 x Digital Realty DuPont Fabros Trust, Inc. Technology, Inc. 23.0 x 20.4 x 29 Data Centers owned by Equinix, Inc. Verizon Communications Inc. 12.8 x 13.3 xBC Partners , Longview Asset Management and Data Centers and Colocation Medina Capital Business of CenturyLink, Inc. 12.0 x -(1) Equinix, Inc. Telecity Group plc 16.3 x 15.1 x
(1) Morgan Stanley was not able to calculate the relevant multiple based on publicly available information.
Selected Transactions Acquiror Target LTM EBITDA Multiple NTM EBITDA Multiple Blackstone REIT QTS Realty 27.6 x 24.9 x Operating Trust, Inc. Partnership; The Blackstone Group Inc. Digital Realty InterXion Holding Trust, Inc. N.V. 25.5 x 22.3 x Digital Realty DuPont Fabros Trust, Inc. Technology, Inc. 23.0 x 20.4 x
Amending and restating the first full paragraph on page 56, under the sub-heading "-General", as follows (with new text underlined and deleted text marked with a strikethrough):
In the two years prior to the date of its opinion, Morgan Stanley and its
affiliates have provided financing services for the Company and received
aggregate fees of approximately
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in respect of the
proposed Merger. In connection with the proposed Merger, the Company has filed
relevant materials with the
Participants in the Solicitation
The Company and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the Company's stockholders in
connection with the proposed merger. Information about the directors and
executive officers of the Company is set forth in the Proxy Statement, the
Company's proxy statement for its 2021 annual meeting of stockholders on
Schedule 14A filed with the
Cautionary Statement Regarding Forward-Looking Statements
The information included herein, together with other statements and information publicly disseminated by the Company, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions.
In particular, statements pertaining to the Company's capital resources, portfolio performance, financial condition and results of operations contain certain forward-looking statements. Likewise, all of the Company's statements regarding anticipated growth in the Company's funds from operations and anticipated market conditions, demographics and results of operations are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "estimates" or "anticipates" or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and we may not be able to realize them. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected.
The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: (i) the Company's proposed merger with Parent may not be completed in a timely manner or at all, including the risk that any required regulatory approvals are not obtained, are delayed or are subject to unanticipated conditions that could adversely affect the Company or the expected benefits of the proposed merger or that the approval of the Company's stockholders is not obtained; (ii) the failure to realize the anticipated benefits of the proposed merger; (iii) the ability of Parent to obtain debt financing in connection with the proposed merger; (iv) the possibility that competing offers or acquisition proposals for the Company will be made; (v) the possibility that any or all of the various conditions to the consummation of the merger may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); (vi) the occurrence of any event, change or other circumstance that could give rise to the termination of the merger, including in circumstances which would require the Company to pay a termination fee or other expenses; (vii) the effect of the announcement or pendency of the merger on the Company's ability to retain and hire key personnel, its ability to maintain relationships with its customers, suppliers and others with whom it does business, or its operating results and business generally; (viii) risks related to diverting management's attention from the Company's ongoing business operations; (ix) the risk that shareholder litigation in connection with the merger may result in significant costs of defense, indemnification and liability; (x) the potential widespread and highly uncertain impact of public health outbreaks, epidemics and pandemics, such as the COVID-19 pandemic; (xi) loss of key customers; (xii) indemnification and liability provisions as well as service level commitments in the Company's contracts with customers imposing significant costs on the Company in the event of losses; (xiii) economic downturn, natural disaster or oversupply of data centers in the limited geographic areas that the Company serves; (xiv) risks related to the development of the Company's properties including, without limitation, obtaining applicable permits, power and connectivity and the Company's ability to successfully lease those properties; (xv) weakening in the fundamentals for data center real estate, including but not limited to, increased competition, falling market rents, decreases in or slowed growth of global data, e-commerce and demand for outsourcing of data storage and cloud-based applications; (xvi) loss of access to key third-party service providers and suppliers; (xvii) risks of loss of power or cooling which may interrupt the Company's services to its customers; (xviii) inability to identify and complete acquisitions and operate acquired properties; (xix) the Company's failure to obtain necessary outside financing on favorable terms, or at all; (xx) restrictions in the instruments governing the Company's indebtedness; (xxi) risks related to environmental, social and governance matters; (xxii) unknown or contingent liabilities related to the Company's acquisitions; (xxiii) significant competition in the Company's industry; (xxiv) recent turnover, or the further loss of, any of the Company's key personnel; (xxv) risks associated with real estate assets and the industry; (xxvi) failure to maintain the Company's status as a real estate investment trust ("REIT") or to comply with the highly technical and complex REIT provisions of the Internal Revenue Code of 1986, as amended (the "Code"); (xxvii) REIT distribution requirements could adversely affect the Company's ability to execute its business plan; (xviii) insufficient cash available for distribution to stockholders; (xxix) future offerings of debt may adversely affect the market price of the Company's common stock; (xxx) increases in market interest rates will increase the Company's borrowing costs and may drive potential investors to seek higher dividend yields and reduce demand for the Company's common stock; (xxxi) market price and volume of stock could be volatile; (xxxii) risks related . . .
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