SINGAPORE - GDS Holdings (NASDAQ:GDS) Limited (NASDAQ: GDS; HKEX: 9698), a prominent developer and operator of high-performance data centers, has announced through its international affiliate, DigitalLand Holdings Limited (GDS International), the successful closure of a $1 billion Series B financing round. The capital will be used to support the development of data centers outside mainland China.
The Series B investment, led by Coatue Management with significant participation from The Baupost Group, includes institutional private equity investors predominantly from the United States. This funding is expected to finance the development of up to 1 gigawatt (GW) of data center capacity.
GDS Holdings, which will not exercise its pre-emption rights for this equity raise, will retain a 37.6% equity interest in GDS International post-closing, on an as-converted basis. The transaction values GDS Holdings' stake at approximately $1.3 billion or about $6.75 per American Depositary Share.
The investment underscores the rapid growth of GDS International, which boasts a portfolio of approximately 480 megawatts (MW) of data center capacity in service and under construction, with an additional 590 MW earmarked for future development. The company's presence spans strategic locations in Hong Kong, Singapore, Malaysia, Indonesia, and Japan.
William Huang, Chairman and CEO of GDS Holdings and Chairman of GDS International, expressed enthusiasm for the growth prospects in markets around Singapore-Johor-Batam, which are drawing both regional and global hyperscale demand. Investors Coatue Management and The Baupost Group have lauded GDS International's management team and its swift expansion, signaling confidence in the company's strategic positioning to meet future demands for AI and hyperscale solutions.
Following the close of the transaction, GDS Holdings will no longer consolidate GDS International for accounting purposes, nor will it maintain the right to appoint a majority to the Board of GDS International.
The completion of the Series B issuance relies on the satisfaction of closing conditions outlined in the definitive agreements. The shares issued will be exempt from registration under the Securities Act of 1933, as per Section 4(a)(2) and Regulation S, and will not be offered or sold within the United States without registration or an applicable exemption.
GDSI's financial and legal advisors for the transaction are Morgan Stanley (NYSE:MS) Asia Limited and White & Case, respectively, while Latham & Watkins served as the legal advisor for Coatue.
This development is based on a press release statement from GDS Holdings Limited.
InvestingPro Insights
GDS Holdings Limited's recent $1 billion Series B financing round for its international affiliate, DigitalLand Holdings Limited, comes at a time when the company's financial metrics paint an interesting picture. According to InvestingPro data, GDS Holdings has a market capitalization of $55.57 million USD, which seems relatively modest considering the scale of its recent funding and international expansion plans.
The company's P/E ratio stands at 13.56, suggesting a reasonable valuation relative to its earnings. This is further supported by an InvestingPro Tip indicating that GDS Holdings is trading at a low P/E ratio relative to its near-term earnings growth. This could be particularly relevant for investors considering the company's ambitious expansion plans outside of mainland China.
Another noteworthy InvestingPro Tip reveals that GDS Holdings holds more cash than debt on its balance sheet. This strong financial position aligns well with the company's strategy to finance up to 1 GW of data center capacity through the recent funding round.
For investors interested in dividend stocks, GDS Holdings offers a dividend yield of 4.67% as of the last reported date. The company has also demonstrated a commitment to shareholder returns, with an InvestingPro Tip highlighting that it has raised its dividend for 7 consecutive years.
These insights, along with 9 additional tips available on InvestingPro, provide a more comprehensive view of GDS Holdings' financial health and market position as it embarks on its international expansion journey.
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