A Major Deal to Help Cool Down Power-Hungry Data Centers
A major technology company is making a big move to help solve one of the biggest challenges in the tech world today: keeping computer systems cool. SLB has agreed to buy Kelvion, a company that specializes in cooling and heating systems. This purchase is designed to help build better infrastructure for data centers, which are the massive warehouses of computers that power the internet and artificial intelligence (AI).
As technology grows, computers need more power. When computers use more power, they get very hot. Because of this, cooling systems have become incredibly important. By buying this cooling specialist, the purchasing company hopes to offer complete, ready-to-use setups for the rapidly growing data center market.
Why Keeping Computers Cool is a Huge Business
The rise of artificial intelligence is causing companies to invest heavily in new computer systems. This shift requires highly advanced cooling technology. The company being acquired, which has been in business for over a century, makes specialized equipment that helps manage heat. Their products are used in data centers, renewable energy projects, and other industrial settings.
This cooling business is currently seeing massive growth. For the current year, the company is expected to bring in between $2.3 billion and $2.4 billion in total revenue. A large portion of this money comes directly from data centers, which are expected to bring in between $1.2 billion and $1.3 billion this year alone. Beyond computers, their heat-management systems are also used for things like heat pumps, clean energy, and capturing carbon emissions.
Boosting the Speed of Data Center Construction
The company buying the cooling specialist already has a fast-growing division focused on data centers. Over a recent two-year period, this division grew its revenue at a rate of more than 90 percent. By the end of the current year, its total delivered capacity is expected to pass 2 gigawatts.
To help customers get their computer systems up and running faster, the company uses a special building method. They build parts of the data centers in factories first, then ship them to the final location. This modular method can make building on-site much simpler and can speed up the setup time by up to 40 percent. Adding advanced cooling systems directly into these pre-made building blocks will make the process even smoother for customers.
The Financial Details of the Agreement
The transaction involves several key financial details:
- The total purchase price is approximately $3.4 billion in cash.
- The buyer will also take on about $0.7 billion of the seller's debt.
- The seller is currently owned mostly by one investment group, with another investment group holding a smaller share.
- The buyer expects the deal to increase its earnings per share and free cash flow within the first 12 months after the deal is completed.
- The companies expect to save about $120 million every year within three years of closing, thanks to lower costs and new sales opportunities.
Looking Ahead to Future Growth
Once the two businesses are combined, they are expected to generate more than $2 billion in data center revenue this year. Looking further ahead, the buying company has set some big goals. In two years, they want their combined data center business to reach between $4.5 billion and $5 billion in revenue, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $700 million to $800 million.
Even with this large purchase, the buying company plans to keep its finances stable. They still plan to return more than $4 billion to their shareholders this year through dividends and by buying back their own stock. They also expect to keep returning similar amounts of money to shareholders in the following year.