By Neil Maidment
LONDON (Reuters) - British data centre provider Telecity Group Plc (LONDON:TCY) has opened talks on a possible 2.3 billion pound ($3.5 billion) takeover by Equinix Inc (NASDAQ:EQIX), throwing into doubt Telecity's deal to buy Interxion Holding NV agreed three months ago.
Telecity, which runs some of the huge computer centres which process traffic on the Internet, said on Thursday it believed it was duty-bound to enter talks with U.S. group Equinix over a possible offer of 1,145 pence per share, a 27 percent premium to Wednesday's closing price.
The proposed deal, made up of 54 percent cash and 46 percent Equinix stock, sent Telecity shares up 23 percent.
Investec analyst Roger Phillips said an Equinix-Telecity tie-up would create the number one player in Europe by a large margin, noting: "If this deal consummates, Interxion is left at the altar looking highly sub-scale, and in our view would likely have to enter an alternative end-game."
Telecity's deal with Dutch rival Interxion, announced in February, came as the company looked to tap growing demand for "cloud" technology, whereby the data and processing for devices like smartphones is carried out on millions of remote servers.
That agreement would involve Interxion shareholders receiving 2.3386 new Telecity shares for each Interxion share, valuing the offer at $2.2 billion when it was announced.
Telecity said on Thursday the Interxion deal prohibited either company from soliciting or discussing alternative proposals except in limited circumstances, and it believed the Equinix approach was one such situation.
Interxion reacted to the development by reiterating its commitment to the "strategically compelling" deal.
In a separate statement, Equinix, which has a stock market value of almost $15 billion, said the Telecity deal would add capacity to several of its locations in Europe such as London and extend its footprint into new locations such as Dublin, Milan and Warsaw.
Equinix must decide whether to make an offer by June 4.
Telecity also released a first-quarter trading update and reiterated guidance for full-year revenue growth of between 8 and 10 percent and stable core margins.