MainOne CEO Funke Opeke says Equinix is buying her company for the right price

The African tech scene woke up today to exciting news about the landmark acquisition of MainOne, one of the region’s most important and pivotal tech companies in the past decade, by Equinix, a U.S. multinational specializing in internet connection data centers.

The story of MainOne starts with founder and CEO Funke Opeke moving back to Nigeria after working as an executive at Verizon. When she noticed how poor internet connectivity was in Nigeria, she started Mainstreet Technologies, the company behind the development of the MainOne Cable, to provide network solutions to businesses in Nigeria and West Africa in 2008.

MainOne went live in 2010 as West Africa’s first privately owned, open access, undersea high-capacity 7,000-km cable stretching from Portugal to West Africa with landings along Accra, Dakar, Abidjan and Lagos.

The company, which services businesses in more than 10 African countries, is now an Equinix subsidiary and the acquisition, subject to regulatory approval, is pegged at $320 million. When completed, it will become the largest acquisition of a tech company in Nigeria and the first landmark deal made by an African woman tech CEO.

TechCrunch had a chat with Opeke and Judith Gardiner, VP Growth and Emerging Markets at Equinix, to discuss the deal and address reports that MainOne was bought for cheap.

TechCrunch: If you’ve been following the reactions to the news this morning, there are two camps with opinions on the deal. Some think Equinix acquired MainOne at a good price after you ran the company profitably, while others think MainOne was underpriced. There are reports that MainOne has invested up to $400 million in the course of building internet and data infrastructure in West Africa. Do you see why a part of the public is conflicted about MainOne is selling at $320 million?

Funke Opeke: Interesting question. First, I think Equinix is gaining a competitive, informed price for the shares in MainOne and the shareholders retained a leading investment bank to run a competitive process. And we’re very satisfied and pleased with the offer made by Equinix and the value they represented to the shareholders and to the business going forward. But they were not the only interested party.

Now, of course, we’ve raised capital through the years, but not all the capital we’ve raised is equity. In fact, MainOne has not raised equity since the initial founding of the company. We have raised debt, we have refinanced debt, we have extended that debt to grow the business. So when you look at the sale of shares in MainOne and the value, one, you shouldn’t say “OK, because MainOne has raised this much capital over the years, then we have to multiply that by a certain amount to achieve the value of the business.”

The other thing, of course, is you have to look at the revenue and profits generated [by] the business, earnings multiples of the business, and I can assure you that the shareholders of MainOne who are selling their shares are seasoned investors. And I think they are pleased with the levels of returns that they are achieving.

Would you like to highlight the share of equity and debt you’ve raised throughout the years just for clarification’s sake?

FO: I don’t have those numbers in front of me, and we have raised several rounds of debt or rolled over several rounds of debt. The company to the public domain was initially capitalized with $120 million in equity and $120 million in debt. You should also note that the investors in MainOne started investing in 2008, and, obviously, there have been partial distributions to these investors through the tenor of the business.

OK. So you’re saying this wasn’t any forced or distressed sale?

FO: Not at all. I mean, we’re doing well, we’re having one of our best years ever. Our businesses growing, responding to the challenges faced in our region. We opened a new data center in Ghana in June of this year, we are expanding our data center facility in Lekki and that will be open in Q1 2022.

We are critical to the digital infrastructure of West Africa, no doubt, and we expect that we will continue to grow that as part of the global platform that Equinix brings. It’s a fantastic story that we can grow as part of that global platform and have access to additional investment capability, the technology and the solutions they have to offer the global customers who are increasingly wanting to do business in our region.

But this is no kind of distress sale. Our shareholders who are financial investors have been in the company from the initial investors almost 13 years around 2008 to all the other institutional investors who came in in 2009. And you would agree with me, but that is an extensive period. But these are also infrastructure investors who realize that it takes time for the infrastructure to mature and become productive. They have seen their investment become productive for them in recent years and this was a good time to exit and they couldn’t hand it off to a better company than Equinix. Our strategies are aligned, the culture is aligned. I think it’s an exit that the shareholders of MainOne are really proud of.

Judith Gardiner: And I would add to Funke’s point that when we are looking at potential targets to acquire, we really put an awful lot of effort into the assessment of the management team, the assets, the strategy that the company has to make sure that it’s going to fit with ours and also plug into our platform.

And for us, MainOne was without a doubt, the best match for us on the market. And I think the other thing is that we see the connectivity, the cable Funke started many years ago from Lagos to Portugal, as a key differentiator. And we’re also really encouraged by the amount of land that MainOne has for expansion, which is incredibly crucial to be able to expand in the market and extend our platform.

Talking about Equinix and your plans for Africa, we see other global players such as recently Facebook and Google doing stuff with their 2Africa and Equiano subsea cables. Do you see any threat to the work you’ve done at MainOne?

FO: Not at all. One of the studies Google did on the impact of their submarine cables that they had built in other parts of the world is actually when they start building in a region, they actually buy more than they’re able to provide themselves. So we see the entrance of global platforms and other players with their own direct investments into our market not a sign of competition but as a sign of the growing size and significance of our market and the need for greater participation by these players.

From the inside of the business, these companies are not building enough infrastructure for them not to need to buy from others, not to need to extend the services to different locations, and not need diversity from their networks. So yes, there is more interest in our market because our market has become more significant. Yes, some of the interests and the investments will compete with us. But I think it would also largely accelerate the growth of our market. That means a bigger business opportunity or addressable market for MainOne.

How does Equinix see competition playing out with large data centers, such as Amazon in South Africa and Africa Data Centres?

JG: Amazon is one of our largest customers. Amazon builds its own data centers, which tend to be for its own use. But Amazon also takes very large space with Equinix around the world for cloud on-ramps for their compute, and really for any data that needs to flow around the world, they will tend to use an Equinix or a colocation company. So, yes, they have their own data centers in South Africa. But, I would expect that we’re going to see the global players coming into MainOne now that we are extending our Equinix platform.

How does this acquisition bring more business into Nigeria and Africa markets?

FO: Just as an extension of what Judith said, global players are increasingly interested in Africa because we’re on the digital map. Now we have more users on the internet, their consumption of digital services and applications is growing. But how much of that value chain is being provided from within Africa, and Equinix is coming into Africa to help us deepen the investments to host cloud service providers and enterprises here who want to be a part of this global fabric to enable global business.

That clearly in and of itself is a growth strategy that enables us to capture more market share and provide services as companies continue to digitize, as more users continue to get access to broadband services. It enables us to provide more of what they need, which is a growth strategy.

And it also enables the global service providers as they seek to reach more of the African population to leverage the platforms we have within the region, which we will be growing, including building out the data center in Sagamu, which is more investment, more business, more jobs in Africa to serve the needs of the African digital population and for the rest of the world that wants to engage with Africa.

JG: Our acquisitions tend to be demand-driven by our customers, our international customers. And this is very much one of those where our customers have been saying to us for quite some time, ‘When do you want to go to West Africa, we really need you to go there because we want to extend our own businesses there and we want to do that on your platform.’ And that is the reason that this is one of the highest value tech IT industry acquisitions this year in West Africa, because it was really an essential part of our new market strategy.

I wouldn’t say just West Africa, it’s probably the whole of Africa. I’m not sure there’s any bigger acquisition made this year. In fact, it’s one of the rare exits to have happened on the continent and the first major one from a female founder. How does it feel to be in both exclusive clubs of founders that have exited their companies in Africa?

FO: Well, I am delighted. It’s been a Herculean effort, but not just of myself, but the whole team, my shareholders, the investors who wrote the check, who provided the governance, the environment, the market, the consumers who have embraced the services we have and have walked with us through the years. And I’m also gratified that our exit is coming in form of access to a global leader strategic in our space that is coming to the continent for the first time to invest and help us grow the business. And we’ll ensure that there’s good alignment so that the company, the team, the investments, the customer base, the product sets can all continue to grow. 

But as a female founder, I hope that to other female founders and to young women who are considering careers in tech or starting a business, this demonstrates to them that [making an exit] is indeed achievable. It is a good example for them and it’s a good motivator. So to that extent, I think being a female founder has significance. But I think in terms of the business, you know, it’s not gender-specific. And I think it’s just a great exit of a great company that a lot of people have worked at to make successful. And I think, really, to the credit of Equinix that they have identified by and they’ve chosen to take the bold step and come into the continent with us. And we look forward to the continued growth of digital infrastructure in Africa as a result.