Hillhouse invests $400m in China data center player

“I am very pleased to secure this capital to support our growth at a time when new IT infrastructure development in China is going to a higher level,” William Huang, chairman and CEO of GDS, said in a release. “Furthermore, I am very pleased to have done it in a way which adds value to GDS and strengthens our shareholder base. Hillhouse is one of the most respected investors, and we look forward to working with them over the long term.”

Hillhouse invested alongside specialist developer and existing investor ST Telemedia Global Data Centres, which acquired an additional 1.2% interest for $105 million, taking its total ownership to 34.2%. The placement was realized at a pricing equivalent to $65 per share. GDS shares have gained about 10% since the announcement of the deal, closing at $80.56 on June 23. This gives the company a market capitalization of about $12.2 billion.

GDS provides data infrastructure services, including server and IT equipment housing, power supply, and cooling. The idea is to cover every layer of the data center and IT value chain. The company has about 650 clients, including internet, cloud, and financial services companies. 

Last year, GDS entered a joint venture with Singapore’s GIC Private, whereby the sovereign wealth fund acquires 90% equity interests in built-to-suit data centers in lower-tier cities across China from GDS, which will develop the projects as 100% owner during the construction phase. GDS will act as operator and retain its 10% stake in each project. The plan is to fill rising supercomputing demand among GDS’s clients in lower-tier cities.

Founded in 2006, GDS is an investee of SBCVC, a Chinese venture capital arm of SoftBank. It raised $192 million in its IPO in late 2016. Other backers include China Ping An Insurance Overseas, which invested $150 million last year. Revenue increased 32% during 2019 to RMB4.1 billion ($583 million), while net losses widened from RMB430 million to RMB442 million.

Chinese data infrastructure has proven a compelling opportunity set for PE and VC investors. Activity in the past 12 months alone includes large investments in Tenglong Group, Airtrunk, Chayora, and Princeton Digital Group, as well as the merger of ChinaData and Bridge Data Centers by Bain Capital. Earlier this week, Blackstone committed $150 million to 21Vianet, which claims to be China's largest carrier-neutral and cloud-neutral data center player.

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• Topics
• Greater China
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• PIPEs
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• Hillhouse Capital Management