Aftermarket raid: Embattled data centre company NextDC’s shares soar

One of Australia’s largest data centre operators is facing a potential takeover battle after a major delay to its flagship facility in Melbourne left it vulnerable to rival AI property companies.

NextDC, which has 17 data centres operating in Australia, lost 40 per cent of its value in mid-October after it told the market a planned upgrade to its West Footscray site in inner west Melbourne would be delayed into the 2028 financial year, hitting its earnings forecasts hard.

On Wednesday night, Australian warehouse firm Goodman Group and American investment trust Digital Realty launched a joint bid to buy up to 9.9 per cent of NextDC’s shares.

Companies commonly make strategic investments in other firms, but Goodman and Digital Realty’s decision to buy the shares after the market closed without giving advance notice to NextDC has the hallmarks of an oppositional approach.

That sent the stock soaring back up about 44 per cent by lunchtime to $9.43 even as NextDC’s board, led by managing director Craig Scroggie and chairman Douglas Flynn branded it an “opportunistic move”. That jump gave the company a valuation of about $7.15 billion.

In a statement to investors issued via their brokers, Goodman and Digital Realty said they did not intend to mount a takeover bid “at this time” but reserved the right to make a move in the future.

Community opposition had prompted power company Jemena to halt plans to install industrial-scale power poles on suburban streets to supply the NextDC property in West Footscray.

The data centre business is reliant on taking in funding and using it to quickly build facilities that can be leased out to meet payments on the debt, making delays very costly.

AI data centres have become a political flashpoint both in Australia and abroad, including in the United States where candidates who opposed the facilities on the basis of noise, emissions, job losses and water-use enjoyed success in Wednesday’s midterm elections.

The Victorian government is only expected to make a decision on approving further expansions for NextDC’s site after the state election at the end of this month.

Markets have sharply marked down the value of many AI companies in recent months as fears grow about the level of debt that technology companies are taking on to fund data centre construction and chips to train fresh large language models.

Firmus, another Australian data centre company, failed to go public last month after investors baulked at its intended $44 billion valuation.

NextDC has appointed bankers at Barrenjoey and UBS to advise on any takeover attempt.

“Any bona fide approaches will be considered by the board on their merits and in the best interests of all NextDC shareholders,” the company’s board said in a statement.

A Goodman Group spokeswoman declined to comment. The company traditionally builds large warehouses in industrial suburbs, which it leases to companies such as retailers and supermarkets. Since 2023, it has been moving into the data centre business, with mixed success.

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