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Toronto’s TeraGo acquires top Canadian cloud provider

CloudInfrastructureTeraGo

Internet service provider TeraGo Networks Inc. has announced its purchase of Kelowna, B.C.-based cloud provider RackForce for $33 million.

The majority of this amount, $31 million, will be in cash while $2 million will be in common shares of TeraGo.  The announcement follows hot on the heels of three other acquisitions in the channel, namely SoftwareOne’s acquisition of CompuCom’s software business, PC Mall’s acquisition of En Pointe Technologies Inc. assets, and Insite Computer Group’s merger with Edmonton-based F12 Networks Inc.

Stewart Lyons, president and CEO of TeraGo told CDN that the deal, worth $33 million and is expected to close March 27, has been in the works since the fall.  While Lyons was reluctant to guess at why RackForce decided to sell, he supposed that the company wields high value right now, thanks good progress it has made in the Canadian market, and was therefore able to generate good interest in the company.

“The RackForce acquisition provides TeraGo with a growth platform in the attractive cloud services industry and helps further position TeraGo as a leading national end-to-end data solution company,” he said in a statement. “RackForce will complement our business and transforms TeraGo into Canada’s premier enterprise class network, data, voice and cloud services provider.”

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He added that, with the acquisition, TeraGo will bring in-house some of the server building expertise that it was lacking, which used to be outsourced to a third party called ThinkOn. While the transition process would last the rest of the year, he said that there is no word yet on whether any of RackForce’s services would be rebranded.

To finance the transaction, Thornhill, Ont.-based TeraGo is taking on an additional $35 million in debt to a total of $85 million.  According to the Financial Post, the company’s shares rose 2.5 per cent following the announcement, reversing an overall drop of 6 per cent this year.

According to TeraGo, the acquisition will grow the company’s data center and cloud services business by increasing its data centre footprint from 40,000 to 58,000 square feet.

Rackforce was identified among the Top 10 cloud providers with Canadian operations by IDC in February.  Its data centre serves primarily the Canadian market, and offers cloud video editing in addition to Infrastructure and Platform-as-a-Service.

Meanwhile, TeraGo says that it differentiates itself in offering clients a colocation cloud transition solution for the company’s critical applications – essentially a way for them to wean themselves off of on-premise servers.

In terms of the numerous acquisitions and mergers that have taken place in the channel in just the last week, Lyons said that it’s a good, rather than a bad sign.

“If you’re in the space, it’s a very big deal, very exciting,” he said. “The cloud is a healthy environment right now and it’s trading in high and multiple figures.  A lot of people want to make sure they get in.”

We have reached out to RackForce for comment and will be updating the story.