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Data centre operator CentriLogic beefs up with Capris Group acquisition

Data centres are one of the hottest growth sectors in telecom as companies become increasingly dependent on their computer networks and outsource IT support to minimize downtime and control costs. Canada’s data centre market, worth $4.1-billion, is poised to grow 7.2 per cent this year, according to IDC Canada.

Q9 Networks

CentriLogic, one of Canada's largest independent data centre operators, is expanding with an agreement to acquire the Capris Group, an Ontario-based IT services provider.

The $9-million all-cash deal, which will be announced Monday, is the latest takeover in a wave of consolidation sweeping the industry. Data centres are one of the hottest growth sectors in telecom as companies become increasingly dependent on their computer networks and outsource IT support to minimize downtime and control costs. Canada's data centre market, worth $4.1-billion, is poised to grow 7.2 per cent this year, according to IDC Canada.

"This is the first step in our expansion plans across Canada," said chief executive officer Robert Offley. "The acquisition of Capris rounds out our capabilities in Ontario and the [Greater Toronto Area] and we'll now look to other provinces."

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In addition to western Canada, CentriLogic is also scouring for potential acquisitions in Quebec. The company already operates two Ontario-based facilities, one in Toronto and another in nearby Mississauga, and plans to open two additional data centres in Canada this year as it strives to keep pace with growing demand.

Internationally, it plans to acquire one data centre in the United States, where it currently operates two facilities. It will also add a second facility in the United Kingdom. (It also operates one facility in Hong Kong but has no immediate expansion plans for Asia.)

CentriLogic's expansion drive comes on the heels of "accelerated growth" in 2012. Although the privately held company does not disclose detailed financial information, it recently revealed that revenues grew 75 per cent on a year-over-year basis, while its customer base expanded by more than 25 per cent. That growing roster includes corporate customers like Wind Mobile, Xerox, Bausch & Lomb, Wegman's and Autodesk.

Its acquisition of the Capris Group, however, is meant to give CentriLogic a competitive advantage against its Canadian rivals by offering more complex IT solutions.

Capris, which caters to a number of large customers including financial institutions, specializes in offering higher-value services including application management, platform management and disaster recovery – meaning it can design and deploy an IT project from "end to end" including backup and storage. In contrast, other data centre operators offer more basic services such as managing servers and providing the requisite cooling and power.

Specifically, CentriLogic is trying to up the ante on rivals like Q9 Networks Inc. and Cogeco Cable Inc., which are also in expansion mode.

Q9, which was acquired by an investor group including BCE Inc., plans to spend up to $150-million over the next two years to expand existing data centres in Ontario, Alberta and British Columbia, and to build at least one new site. Cogeco Cable, meanwhile, recently acquired PEER 1 Network Enterprises Inc. and plans to open a new facility in Montreal.

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Independent data centre operators are quickly being snapped up as larger companies seek new avenues of growth. For its part, Capris evaluated "numerous" suitors before settling on CentriLogic, said president Boris Novosel.

Following the acquisition, CentriLogic will maintain Capris's 15,000-square-foot facility in Mississauga to bolster its capacity. But as it competes for more customers, there is speculation that CentriLogic could also become an acquisition target.

"Never say never," said Mr. Offley. He added: "We still see some benefits from being independent. We can be nimbler and more customer-focused than … the large telcos."

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