Source: Switch Inc.
(Bloomberg) — SoftBank Group Corp. is studying potential acquisitions including data center operator Switch Inc., a sign billionaire founder Masayoshi Son aims to ride an AI-fueled boom in digital infrastructure, people with knowledge of the matter said.
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The Japanese company has held discussions with Switch leadership and has been conducting due diligence on the closely held company, the people said, asking not to be identified because the information is private. SoftBank also has been in advanced talks on a potential purchase of one of Switch’s main private equity backers, New York-listed investment firm DigitalBridge Group Inc., Bloomberg News reported last week.
Son has been looking for ways to play a bigger role in an artificial intelligence race that has elevated SoftBank’s longtime business partner Nvidia Corp. to the status of the world’s most valuable company. An acquisition of Switch, which specializes in designing and operating energy-efficient data centers, would help the Japanese billionaire control a key bottleneck to AI development.
The owners of Switch have been seeking a valuation of around $50 billion including debt for the data center operator in any deal, some of the people said. They have also been simultaneously preparing for a potential initial public offering of Switch as soon as early next year, according to the people. Switch’s backers have been considering seeking a valuation of about $60 billion including debt in a stock-market listing of the company, they said.
The Japanese firm’s shares slid as much as 1.7% in Tokyo Friday before recouping losses.
What Bloomberg Intelligence Says
SoftBank’s AI infrastructure budget is set to sharply rise if it acquires US data center operator Switch at a valuation of up to $50 billion, including debt. Headline numbers for Stargate, SoftBank’s initial data center investment, are larger at $500 billion, but cash needs are closer to $40 billion when adjusting for a 40% joint-venture stake and project financing with only 20% equity. SoftBank may spend even less on Stargate, given its less-active-than-expected participation.
– Kirk Boodry and Chris Muckensturm, analysts
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The SoftBank team often analyzes numerous potential deals in a particular space before deciding which transaction to pursue, and it sometimes decides to do multiple deals in a particular area it wants to rapidly expand in. Acquiring Switch would allow SoftBank to own a large portfolio of data centers outright at a time when demand for their computing power is growing rapidly.
