By Svea Herbst-Bayliss
CyrusOne Inc, a U.S. data center operator with a market capitalization of around $ 9 billion, is exploring strategic alternatives that include a potential sale of the company, according to people familiar with the matter.
The real estate investment trust is working with investment bank Morgan Stanley to review its options after renewed pressure from some investors to cope with its poor financial performance and high management turnover, the sources said. The company’s shares have been down slightly since January, compared with a 16% rise in the S&P 500 index.
There is no certainty that CyrusOne’s current deliberations will result in a deal, the sources said, requesting anonymity as the matter is confidential.
A spokesperson for CyrusOne did not immediately respond to a request for comment. A Morgan Stanley spokesperson declined to comment.
The company’s stock price jumped 7% on the news on a day when the market as a whole was down sharply.
Based in Dallas, CyrusOne operates more than 50 data centers around the world, seeking to capitalize on the cloud computing trend of companies outsourcing part of their data management.
CyrusOne does not operate major internet exchanges and with growth predicted to slow some, data centers like CyrusOne’s could become more commoditized, according to a Morningstar note.
CyrusOne’s total shareholder return has averaged 26.2% over the past three years, underperforming each of its data center counterparts and falling behind the S&P 500 Index, which reported 61.1%.
Rival QTS Realty Trust, for example, which sold private equity firm Blackstone Inc for $ 10 billion this year, returned 98% over the same period. Morgan Stanley, along with Jefferies LLC, acted as financial advisers for QTS.
Infrastructure and real estate funds are expressing interest in data center assets which may be valued more in the private market than in the public market, analysts said.
Former CEO Gary Wojtaszek said during a profit call at the end of 2019 that no sale was under consideration. Wojtaszek left in early 2020 and was replaced by Tesh Durvasula, who was appointed interim CEO until Bruce Duncan was appointed to the post in June 2020.
In July 2021, the company said Duncan was absent and David Ferdman had been appointed interim CEO. Ferdman co-founded the company and served as CEO from 2000 to 2011.
Activist hedge fund Jana Partners held a 1.4% stake in CyrusOne at the end of the second quarter, according to shareholder data.
Founded by Barry Rosenstein, Jana has always pushed for change behind the scenes and some of her portfolio companies including Whole Foods Market, Pinnacle Foods and Perspecta Inc have been acquired. The company did not respond to a request for comment.