Digital Colony has agreed a C$720m (€478.9m) deal to buy a cloud services company from Cogeco Communications.

Cogeco Communications said it is selling Cogeco Peer 1 to affiliates of Digital Colony, which will remain headquartered in Toronto and adopt a new brand. Cogeco Communications bought Peer 1 in 2013.

Peer 1’s portfolio includes over 3,300 route kilometres of owned, dense metro fibre in greater Toronto and Montreal. The company also owns and operates several data centres across North America and Europe.

As part of the deal, Cogeco Communications will retain significant fibre capacity in Toronto and Montréal.

In addition, Cogeco Communications and Digital Colony have signed a commercial agreement aimed at better supporting their customers and further developing their respective businesses in the future.

Susan Bowen, the CEO of Peer 1, said: “We are grateful for the support and resources Cogeco Communications has provided as we established a strong fibre footprint in Canada’s two largest cities, and served customers across the globe with secure enterprise data centre solutions.”

Marc Ganzi, a managing partner of Digital Colony, said: “Cogeco Peer 1 is poised for continued success and growth as changes in the sector, including increased demand for connectivity, drive digital infrastructure spending in Canada.

“We look forward to investing in the company, the team and the network assets to continue to build the business and unlock value by providing exceptional solutions to their customers.”

The transaction is expected to close during the second quarter of 2019.

Philippe Jetté, the president and CEO of Cogeco Communications, said: “Since Cogeco Communications acquired Peer 1 Hosting in 2013, the data centre and connectivity markets have evolved and consolidated significantly.

“In this context, we made the decision to focus Cogeco Communications’ resources on our Canadian and American broadband services businesses. This transaction will provide greater flexibility to pursue organic investment and acquisition opportunities.”

Cogeco Communications said it expects to use a significant portion of the net proceeds from this sale to repay amounts outstanding under the revolving debt facility.