“Science and Technology Innovation Board Daily”, March 28 (Reporter Chen Mei) PE giants have taken another step. Recently, GDS announced that it has signed a subscription agreement of 587 million US dollars for Series A convertible preferred shares.

According to the agreement, GDS will sell 43.9% of the shares in the international business subsidiary (GDSI) to PE giants, holding the remaining 56.1% of the shares. Meanwhile, 43.9% of the shares were divided by investors such as Gao Lin Capital, Rava Partners, Boyu Capital, Princeville Capital, and Tekne Capital.

Regarding this investment, a relevant person from the agency that took a stake in Wanguo Data told the “Science and Technology Innovation Board Daily” reporter, “The transaction involves a listed company, so it is not convenient to comment more.”

The pre-tax valuation is 750 million US dollars, and Gao Lin Capital has taken another step

According to SEC documents, the subscription price for GDC A series is approximately USD 3.92 per ADS, and GDSI's pre-tax equity valuation is USD 750 million.

Looking back at the past of Gaolin Capital and Wanguo Data, it is easy to see that this is not the first time that Collin Capital has taken a stake in GW Data.

In 2020, after the listing of GDS, Gao Lin Capital subscribed for shares in GDS through a private offering. According to SEC documents at the time, Collin Capital and ST Telemedia Global Data Centres (STT GDC) agreed to make a total equity investment of 505 million US dollars in Universal Data through targeted issuance.

In this transaction, Collin Capital subscribed for 400 million US dollars of shares and STT GDC subscribed for 105 million US dollars of shares.

This time, in addition to Wanguo Data, Gao Lin Capital has also taken a stake in Guanglianda (002410). Regarding these two investments, some investors said that stable and high-yield “digital real estate” is the key to capital inflow.

According to this investor, a data center (IDC) is a type of “digital real estate”, and the entry threshold is higher than that of ordinary basic real estate. “After data centers became the cornerstone of the information economy, the industry received 100 billion dollar investments. Compared to traditional commercial real estate, data centers also have a higher return on investment.”

According to data obtained by the “Science and Technology Innovation Board Daily” reporter, around 2020, the return on investment in data centers in major US cities such as Chicago and Los Angeles was much higher than that of traditional office buildings. Take Chicago, for example. Back then, the return on the capitalization rate of data centers reached 9%, far higher than the return of 6% for office buildings and 5.5% for retail real estate.

More importantly, the investor told the “Science and Technology Innovation Board Daily” reporter that compared to traditional real estate infrastructure projects, the data center has a stable cash flow after entering the lease period, just like logistics real estate. This is also the key to capital scrambling to enter.

When Gao Lin Capital invested in the World Data in 2020, it jumped on the domestic “new infrastructure” wave. After Gaolin Capital subscribed to Wanguo Data, WDS cooperated with CITIC Industrial Fund to establish a joint venture to acquire a data center project in Tongzhou District, Beijing, and named the “Beijing No. 13 Project.”

This time, Gao Lin Capital and others launched Ganguo Data, and the target is its international business.

Behind the capital injection, it is once again targeting the cloud computing service market

The new financing company is responsible for the international business of Wanguo Data. According to the disclosure, according to the disclosure, the international business will become the “second engine” for GDS to find businesses outside of mainland China.

The investor mentioned above told the “Science and Technology Innovation Board Daily” reporter, “In the domestic IDC market, the three major operators dominate. Around 2020, GDS's share of the overall domestic data center service market is about 12%. Judging from the recently disclosed financial data, the race track is becoming increasingly competitive.”

Financial reports show that in 2023, Wanguo Data's revenue was poor. Revenue increased 6.76% year on year, net profit to mother increased -187.68% year on year; earnings per share were -2.96 yuan.

As a result, on the day the new financing was revealed, GDS's stock price plummeted by 26%, showing market concerns about GDS's performance and increased market competition.

So, if GDS chooses the international market, does it have another big chance? The current market consensus is that large models have surged in demand for computing power, stimulating demand for digital storage and processing, so relevant cloud service providers are still important customers of data center service providers.

Looking at the global market, nearly half of the largest data centers are concentrated in the US. Although the Chinese IDC market is growing rapidly, competition is still high.

According to the investors mentioned above, “The key to IDC's business development is capital expenditure. This can be seen in the 'net use of cash in investment activities' in the world data.” According to the data, at the end of 2023, the net cash used by GDS investment activities was -6.326 billion yuan.

However, according to Wanguo Data, in addition to investment from external investors, GDS also provided indirect capital of 595 million US dollars for international business subsidiaries, which is sufficient for the capital expenses of international business subsidiaries.

After Gaolin Capital invested in GDS, GDS said it has established leading market positions in major hub markets in Hong Kong and Singapore.

GDSI (International Business Subsidiary), which received new financing this time, is headquartered in Singapore and is mainly responsible for the construction and operation of GDS data centers outside mainland China, as well as the company's future development of new data centers in Hong Kong, Singapore, Malaysia (Johor), and Indonesia (Batam).

At the same time, there is also an important investor behind GIC Data — GIC Private Limited (Singapore Government Investment Company). Like Temasek, they are all Singapore government sovereign wealth funds, and currently hold 13% of GDS shares.