Spark Sells Majority Stake in Data Centres to Fuel AI Growth
Spark New Zealand is selling 75% of its data centre business to Pacific Equity Partners for up to $705 million, aiming to accelerate capacity expansion amid rising cloud and AI demand.
- Sale of 75% stake in data centre business to Pacific Equity Partners
- Transaction values business at up to $705 million with a 30.8x FY25 pro-forma EBITDA multiple
- Spark retains 25% ownership and expects $486 million cash proceeds at completion
- New standalone company 'DC Co' to manage data centre assets with independent board and debt
- Deal supports Spark’s debt reduction and expansion of 130MW+ data centre capacity pipeline
Strategic Partnership to Unlock Growth
Spark New Zealand has announced a significant move to reshape its data centre business by selling a 75% stake to Pacific Equity Partners (PEP), an established private equity firm known for infrastructure investments. This transaction, valued at up to $705 million, reflects the growing importance of data infrastructure in New Zealand’s digital economy, especially as cloud computing and artificial intelligence drive demand for data storage and processing capacity.
The deal will see Spark retain a 25% interest in the newly formed standalone entity, currently dubbed 'DC Co', which will operate independently with its own board and management team. This structure allows Spark to continue benefiting from the data centre market’s growth while unlocking immediate capital to reduce its net debt.
Financial Implications and Growth Prospects
With a headline enterprise value comprising a base of $575 million plus up to $130 million in earn-out payments contingent on performance targets through 2027, the deal values the business at a premium multiple of 30.8 times its FY25 pro-forma EBITDA. Spark expects to receive approximately $486 million in cash at completion, with deferred payments providing upside linked to operational milestones.
The capital injection is earmarked to support an ambitious development pipeline exceeding 130MW of new data centre capacity, including greenfield projects on Auckland’s North Shore and expansions in South Auckland’s Takanini area. This positions DC Co to capture a significant share of the expanding local market and appeal to international customers seeking reliable, sovereign data infrastructure.
Market Context and Strategic Rationale
As cloud adoption and AI workloads surge, the demand for high-quality data centres in New Zealand is intensifying. Spark’s decision to partner with PEP aligns with a broader trend of telecommunications companies monetising infrastructure assets to fund growth and innovation. PEP’s Secure Asset Fund brings not only capital but also expertise in scaling infrastructure platforms, which could accelerate DC Co’s market penetration and operational efficiency.
Regulatory approvals, including from the Overseas Investment Office, remain a prerequisite for completion, targeted by the end of 2025. Meanwhile, Spark’s management emphasizes that this transaction balances short-term value realisation with long-term participation in a high-growth sector.
Looking Ahead
With Jarden advising on the deal, Spark is poised to strengthen its balance sheet and sharpen its focus on core telecommunications services while maintaining a foothold in the lucrative data centre market. The partnership with PEP could serve as a blueprint for similar infrastructure collaborations in the region, reflecting evolving capital strategies amid technological transformation.
Bottom Line?
Spark’s partial exit from its data centre business marks a pivotal step in balancing growth ambitions with financial discipline in a rapidly evolving tech landscape.
Questions in the middle?
- How will DC Co’s independent management impact operational agility and growth execution?
- What are the specific performance targets tied to the deferred earn-out payments?
- How might this transaction influence Spark’s broader strategic priorities and capital allocation?
