The story is starting to become familiar: A Sacramento company grows up, achieves success – and gets bought out.
It happened again Monday, when fast-growing tech firm RagingWire Data Centers agreed to a $350 million partial takeover by a Japanese telecommunications conglomerate. Privately held RagingWire, which operates massive data centers in Natomas and Virginia, sold an 80 percent stake to NTT Communications Corp., a subsidiary of Nippon Telegraph and Telephone Corp.
Executives with both companies said RagingWire’s 300 employees, including 200 in Sacramento, will keep their jobs. The RagingWire name will survive, too, and is expected to benefit from a massive infusion of capital to help expand the company.
“This is a message of growth,” said Douglas Adams, RagingWire’s chief revenue officer. “We’re going to build a larger business in the United States. ... The senior management is staying in place.”
Still, community leaders often bemoan the scarcity of major corporate headquarters in Sacramento, and RagingWire is the third significant company to take a buyout in the past 20 months. Roseville’s SureWest Communications and Davis biotech company AgraQuest were sold last year. Community leaders say the region needs home offices for their civic leadership, philanthropy and other attributes.
While each company had different reasons for selling, the three takeovers demonstrate that it can be difficult sometimes to develop a large, independent company in a secondary market like Sacramento, which has a shortage of executive talent and other important assets needed to make a company grow. “It’s difficult to grow to Intel size in the Sacramento area,” said Martin Kenney, an expert on regional economies and professor of human and community development at UC Davis.
But Kenney said the proceeds from a takeover pump plenty of new dollars into the Sacramento area, setting the foundation for a new generation of entrepreneurship. “It is not all lemons for us that this happened,” he said.
The region’s chief industrial recruiter, Barbara Hayes of SACTO, agreed.
“There’s a lot of wringing of hands because people say another headquarters is lost. (But) what we’re getting from all these acquisitions is new wealth in the region,” said Hayes, executive director of the Sacramento Area Commerce and Trade Organization. RagingWire’s founders “are now wealthy individuals who hopefully will reinvest in the region,” she said.
RagingWire is one of several companies that have turned Sacramento into a minihub for the data industry, which hosts websites, crunches huge volumes of data and provides other information-technology services for corporate clients from massive, warehouse-like structures. Sacramento is well suited for this business because it’s far removed from the Bay Area earthquake zone and has relatively inexpensive land and electricity.
Founded 13 years ago, RagingWire said it brings in $85 million in annual revenue and is growing by 30 percent a year. It recently announced plans to spend $90 million on a second data center in Natomas, and has major expansion plans for its Virginia operations. Adams said both projects will continue under NTT’s ownership.
Adams said the company could have remained independent and continued borrowing to finance its expansion. But he said it made more sense to join up with NTT. The Japanese company will offer greater access to capital, and has a global sales force and a worldwide network of data centers.
“By joining NTT, we will be able to extend our data center platform globally, expand the markets we serve and add more strategic value to our customers,” RagingWire founder and Chief Executive George Macricostas said in a prepared statement.
Adams said NTT’s worldwide network of data centers will help RagingWire attract larger customers, many of whom want the backing and infrastructure of a global company.
“We will be able to accommodate the largest of customers,” Adams said. “Large companies will be attracted to us because we’re a global player, not a regional or national player.”
NTT spokesman Chris Davis said a key component of the deal is RagingWire’s technologies.
“Having their technology, having their know-how, is very advantageous to us,” he said.