Spark New Zealand (ASX: SPK) has completed the Spark TenPeaks Data Centre Sale, divesting a 75% stake in its data centre operations to Pacific Equity Partners (PEP) for a total enterprise value of up to $705 million. The telecommunications provider received initial cash proceeds of $453 million whilst retaining a 25% shareholding in the newly formed TenPeaks Data Centres. This strategic transaction monetises a high-growth infrastructure asset at a premium multiple whilst maintaining exposure to New Zealand’s expanding data storage sector.
Transaction structure and proceeds
Cash proceeds and earn-out potential
Spark’s immediate benefit centres on substantial balance sheet strengthening through $453 million in upfront cash proceeds. The transaction structure includes deferred consideration of up to $98 million, contingent on the achievement of certain performance-based objectives by the end of December 2027. The company has confirmed all proceeds will be used to reduce group net debt, providing financial flexibility for core telecommunications operations.
The initial proceeds figure represents a reduction from the $486 million announced at deal signing, attributable to the timing of capital expenditure within the data centre business. Final net proceeds remain subject to completion adjustments alongside the deferred payment mechanism.
| Transaction Component | Value |
|---|---|
| Base Enterprise Value | $575 million |
| Earn-out Potential | Up to $130 million |
| Total Enterprise Value | Up to $705 million |
| Initial Cash Proceeds | $453 million |
| Deferred Proceeds | Up to $98 million |
| Spark Retained Stake | 25% |
The debt reduction strengthens Spark’s balance sheet positioning whilst the earn-out structure aligns both parties’ interests in maximising TenPeaks’ operational performance over the next two years.
What is a data centre sale-and-retain structure?
A partial divestment with retained minority ownership allows infrastructure owners to crystallise value whilst maintaining strategic exposure to future growth. This transaction model has gained prominence as private equity firms target data centre assets, which command premium multiples due to predictable cash flows and surging demand driven by cloud computing and artificial intelligence workloads.
Three key investor benefits define this structure:
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Immediate capital realisation — The seller receives substantial cash proceeds at a premium valuation multiple, addressing balance sheet priorities without complete asset disposal.
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Ongoing upside participation — Retaining a minority stake provides exposure to future value creation as the business scales capacity and captures market growth.
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Aligned commercial relationship — The seller typically remains a significant customer, ensuring service continuity whilst participating as both shareholder and revenue contributor in the enlarged entity.
The Spark TenPeaks Data Centre Sale exemplifies this approach, with the 30.8x EBITDA multiple reflecting robust investor appetite for data infrastructure. Earn-out mechanisms further synchronise seller and buyer interests by tying a portion of proceeds to performance milestones, reducing valuation risk for the acquirer whilst offering the seller additional upside if targets are exceeded.
TenPeaks Data Centres: the new entity
Spark’s data centre assets and operations have formally transferred to TenPeaks Data Centres, a standalone company positioned to capitalise on New Zealand’s accelerating data storage requirements. The business enters independent operation with established scale and an ambitious growth mandate backed by PEP’s Secure Assets Fund.
Current capacity and development pipeline
TenPeaks operates over 23MW of live capacity across 11 facilities distributed throughout New Zealand, providing the geographic coverage required to serve enterprise and government customers with redundancy and latency requirements. This existing footprint establishes immediate market presence and recurring revenue streams.
The development pipeline dramatically expands the growth trajectory. TenPeaks has secured planning and sites for over 130MW of additional capacity, representing more than five times current operating scale. Management has indicated significant further expansion potential beyond this initial pipeline, positioning the company to meet sustained demand growth over the next decade as digital transformation and AI adoption accelerate data centre utilisation.
The development pipeline represents substantial growth runway that PEP’s capital commitment will unlock, with construction timelines and customer pre-commitments shaping near-term capacity additions.
Governance and Spark’s ongoing involvement
Spark maintains active governance participation through two board seats, ensuring strategic alignment between TenPeaks’ expansion plans and Spark’s requirements as a key customer. The board composition balances investor oversight with operational expertise:
- Jolie Hodson (Spark CEO) — Non-Executive Director
- Stewart Taylor (Spark CFO) — Non-Executive Director
- Andrew Charlier (PEP) — Representative, Secure Assets Fund
- Evan Hattersley (PEP) — Representative, Secure Assets Fund
- Michael Bendeli (PEP) — Representative, Secure Assets Fund
- Michael Stribling — TenPeaks CEO
This structure preserves Spark’s influence over strategic decisions affecting service delivery and capacity planning whilst PEP assumes operational control through majority ownership and executive leadership. Stribling’s appointment as CEO brings specialised data centre sector experience to guide the aggressive expansion programme.
Valuation and what it signals
The $705 million enterprise value assigned to TenPeaks equates to 30.8x the business’s FY25 pro-forma EBITDA of $22.9 million, a multiple significantly above broader infrastructure asset benchmarks. This premium reflects the strategic value investors place on data centre infrastructure amid structural demand growth driven by cloud migration, artificial intelligence model training, and data sovereignty requirements.
The valuation multiple indicates PEP’s confidence in both near-term earnings growth as committed capacity comes online and longer-term margin expansion as scale economics materialise. Data centre operators benefit from high barriers to entry (power availability, cooling infrastructure, network connectivity), which support pricing power once facilities achieve operational status.
“Spark has built a strong data centre business in New Zealand, operating over 23MW of capacity at 11 facilities across the country. We’re excited to complete this transaction with PEP, which provides a funding pathway for the planned 130MW+ capacity development pipeline and significant growth potential beyond,” said Jolie Hodson, Spark CEO.
The reduction in initial proceeds from $486 million to $453 million stems from capital expenditure timing adjustments, a common feature in infrastructure transactions where completion occurs months after signing. This variation does not alter the enterprise value framework or earn-out potential.
Spark has extracted significant value from assets it developed organically over the past decade, transforming internal IT infrastructure into a premium-valued standalone business through systematic capacity expansion and commercial customer acquisition.
Strategic rationale and future outlook
The Spark TenPeaks Data Centre Sale reshapes Spark’s capital structure and strategic focus. Deploying $453 million in proceeds to debt reduction strengthens financial metrics, potentially supporting credit rating stability and improved dividend capacity. Simultaneously, the 25% retained stake maintains exposure to data centre growth without the capital intensity of funding the 130MW+ expansion pipeline.
Spark’s position as a key customer ensures service continuity for its telecommunications operations whilst generating revenue for TenPeaks. This dual role as shareholder and customer creates natural alignment, with Spark benefiting from both operational service delivery and equity value appreciation as capacity scales.
“We are excited to complete the transaction and officially launch our new data centres business. With our experienced team and the support of both PEP and Spark, we are confident in our ability to rapidly scale our capacity to meet New Zealand’s growing data storage needs,” said Michael Stribling, TenPeaks CEO.
The transaction positions Spark with reduced operational complexity, a cleaner balance sheet, and maintained optionality on one of New Zealand’s fastest-growing infrastructure segments. PEP assumes construction risk and funding obligations for the development pipeline, whilst Spark captures upside through its minority shareholding if execution succeeds.
Key milestones for investors to monitor include:
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Earn-out achievement — Whether TenPeaks meets performance objectives by December 2027, determining if Spark receives the full $98 million in deferred proceeds.
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Capacity expansion progress — Delivery timelines for the 130MW+ development pipeline and customer pre-commitment levels for new facilities.
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Debt reduction outcomes — Impact of the $453 million proceeds on Spark’s leverage metrics and potential capital management implications for shareholders.
The Spark TenPeaks Data Centre Sale demonstrates how established telecommunications operators can monetise infrastructure assets at premium valuations whilst retaining strategic participation in high-growth adjacent markets.
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