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KKR to acquire 20% stake in SingTel's data center unit for $807m

Southeast Asia's economic growth makes it a hotbed of global investment

KKR's transaction for the share of Singtel's data center unit is expected to be completed before the end of the year.   © Reuters

(Reuters) -- Singapore Telecommunications (SingTel) on Monday said global investment firm KKR will acquire a 20% stake in SingTel's regional data center business for 1.1 billion Singapore dollars ($806.87 million).

The deal puts the enterprise value of SingTel's overall regional data center business at S$5.5 billion. The funds will be used to expand the data center's business across Southeast Asian markets, including Singapore, Indonesia and Thailand, SingTel and KKR said in a joint statement.

"Robust digital infrastructure...will play a crucial role in enabling Southeast Asia's flourishing digital economy, and Singapore is well-placed to serve as a central hub for the region," said David Luboff, partner and head of Asia-Pacific infrastructure at KKR, in the statement.

The deal comes amid growing global investors' demand for infrastructure assets across Southeast Asia, lured by the region's growth prospects and the sector's stable and long-term returns.

KKR is making the investment as part of its Asia infrastructure strategy.

Southeast Asia's data center market is expected to grow by 17% over the next five years compared to 12% for the rest of the world, with $9 billion to $13 billion in investments projected for the region, according to the joint statement.

KKR's investment will be used to accelerate the expansion of SingTel's regional data center business across Southeast Asia, including Singapore, Indonesia, and Thailand, and explore new markets including Malaysia, the statement said.

KKR, which said it is making the investment commitment via a tailored solution, has the option to increase its stake to 25% by 2027 at a pre-agreed valuation.

The deal also marks KKR's latest investment in Southeast Asia infrastructure and data center infrastructure globally, adding to its existing investments in the region that includes Pinnacle Towers and Aster Renewable Energy.

The transaction is the first between SingTel and KKR, and enables SingTel to tap into KKR's expertise in investing in data centers and critical telecommunication infrastructure globally in addition to capital.

Singtel's regional data center business is part of the Digital InfraCo unit which was formed in June 2023. Singtel's data center portfolio is expected to grow to a total combined capacity of over 155 megawatt in 2025, with room to scale up to more than 200 megawatt, from 62 megawatt existing capacity.

The transaction is expected to be completed by the fourth quarter of 2023.

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