Megaport to raise $200m to fund acquisition plans

Megaport, a Queensland-headquartered Network-as-a-Service provider, has announced a fully underwritten A$200 million institutional placement to fund the acquisition of Compute-as-a-Service company Latitude.sh, as well as accelerate Megaport’s network expansion into India.

A placement is an allotment of shares made directly from a company to investors, to raise equity capital. 

The $200 million placement will fund the upfront cash of US$70 million to acquire Latitude.sh, equivalent to approximately A$108million; fund the India network land and expand strategy for a total investment of approximately A$43 million; fund one-off transaction costs of approximately A$20million; and raise approximately A$29 million of additional cash to retain as cash liquidity.

The acquisition aims to create a global software platform where networks and compute converge to connect critical workloads. The expansion of connecting automated networks with automated compute accelerates Megaport’s strategy of automating network infrastructure to power the cloud, AI and data centre ecosystems.

By integrating Latitude.sh into Megaport’s global private high-speed network, it’s intended that enterprises will be able to spin up compute and interconnect with clouds, partners, and data centers worldwide, on-demand.

Latitude.sh serves over 1,150 customers across 10 countries, including Australia, and its services are offered through a fleet of over 7,700 servers.

Under the terms of the acquisition, Megaport will acquire 100% of the equity interests in two Latitude.sh entities in the USA and Brazil (collectively, Latitude.sh). The total Upfront Consideration of US$150 million comprises US$70 million in cash and an issuance of approximately 7.8 million Megaport shares equivalent to US$80 million.

In addition to the Upfront Consideration, Latitude.sh vendors are also eligible for up to US$150 million of Contingent Consideration.

The Contingent Consideration is split equally into three US$50 million milestones over the next three years based on revenue targets and successful integration of the Latitude.sh business.

Up to US$100 million of the Contingent Consideration is subject to Latitude.sh meeting specific revenue performance targets over the next two years.

These include a base revenue performance payment of US$25 million if CY26 revenue of US$51.9 million is achieved with the payment increasing to up to US$50 million for outperformance if CY26 revenue of $74.2 million is achieved; and a base revenue performance payment of US$25 million if CY27 revenue of US$80.5 million is achieved with the payment increasing to up to US$50 million for outperformance if CY27 revenue of $115.0 million is achieved.

Completion is expected to occur on or before 31 December 2025.

“Megaport has long been trusted by the world’s largest enterprises to move workloads seamlessly between data centres and the cloud” said Michael Reid, CEO of Megaport.

“By bringing Latitude.sh into the fold, we’re extending that promise beyond the network –into high-performance, optimised compute.”

New division

As part of the acquisition and to continue to provide transparent financial disclosure to shareholders, Megaport will establish a new ‘Compute Division’ under which Latitude.sh will operate.

Latitude.sh’s CEO will be appointed as head of the Compute Division, reporting directly to Megaport’s CEO.

The new Compute Division will share the benefit of Megaport’s go-to-market support and corporate services. Megaport intends to invest in a specialist Compute sales team to further support Compute enterprise sales.

Expanding into India

The investment of approximately A$43million to carry out an accelerated India network land and expand strategy will be achieved through through the acquisition of an unnamed network operator with a local team, approximately 400 active customers, 40 data centre locations and an annual recurring revenue of approximately A$6 million.

The strategy by Megaport will also see investment into the build-out of existing sites in India with Megaport NaaS hardware, allowing for the sale of Megaport product vertical in addition to its existing offerings.

The company said it is seeing "strong demand" from existing customers for access to India.