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Macquarie Technology goes to the market for AI bankroll

Listed telco, computing and data centre services provider Macquarie Technology Group (ASX:MAQ) is asking big investors for $130 million to help it climb aboard and remain on the AI express.

In the company’s first major capital raising since it listed more than 23 years ago, Macquarie announced the issue on Tuesday at a small 7.6% discount to last Friday’s last sale.

The issue confirms that Macquarie has thrown its lot in with data as its future business rationale.

Macquarie’s Data Centres division accounts for 17% of group revenue, and almost a third of earnings before tax.

The issue will be a non-underwritten institutional placement by Macquarie to help finance its data centre business in the next phase of growth.

The money will be raised at $58.50 per new share, compared to the last traded price of $63.29. Around 2.22 million shares will be issued in the deal.

Trading was halted at Friday’s close of $63.29 and the shares will fall towards the issue price when dealing resumes, probably today.

Management said in Tuesday’s statement that the additional capital will strengthen the company’s balance sheet and provide funding to pursue growth opportunities in its data centre portfolio.

Macquarie currently has five data centres in operation with a pipeline for additional growth led by a new centre on Sydney’s north shore.

The company said the institutional placement is also expected to significantly increase liquidity and free float.

The company explained that it is raising funds in order to increase its exposure new developments in the tech space led by the current cloud computing and the emerging artificial intelligence (AI) booms.

“As our economy becomes more digitised, organisations are moving their data and software applications to the cloud. Clouds live in the latest generation of data centres, like ours.

“Data Centres are digital infrastructure along with our cloud and cyber security platforms. AI is the next significant megatrend for data centres and the digital economy driving higher power density and demand for capacity.

“As these two megatrends combine, we expect to see very strong demand for the latest generation of data centres.”

To help its convince investors to stump up the money, Macquarie reaffirmed its 2022-23 financial year EBITDA guidance of approximately $102 million to $104 million. The data centre business if forecast to account for between $32 million and $34 million.

The company listed nearly 24 years ago as Macquarie Telecom Group and in April of this year changed its name (and focus) Macquarie Technology Group.

Macquarie’s fund raising pales, however, compared with the $618 million NextDC sought in early May to finance the expansion of data centres in NZ, Indonesia and here in Sydney.

NEXTDC said last Friday that it had started construction of the KL1 facility in the Malaysian capital, Kuala Lumpur, with a completion date in late 2025.

The KL1 facility represents a three billion ringgit – about $A1 billion – investment by NEXTDC in Malaysia and the region, over the data centre’s five to ten year development

“What’s underpinning our investment in Malaysia is our belief that the use of cloud services in Malaysia is about to boom. It is reinforced by public statements and direct feedback from our major customers, the cloud service providers,” said Dr Alex Teo, NEXTDC’s general manager for Asia and Japan.

The capital to support the move will come from the $618 million raising.