Colony Capital agrees to buy Digital Bridge for $325 million

Colony Capital has acquired investment firm Digital Bridge for $325 million, resulting in a merged firm with $60 billion in total assets under management, according to a Colony spokeswoman.

In the next 18 to 24 months, Colony CEO and Executive Chairman Thomas J. Barrack Jr. will relinquish the CEO position. He will be replaced as CEO by Digital Bridge’s co-founder and CEO Marc C. Ganzi. Mr. Barrack will continue to serve as executive chairman. The transition is expected sometime in 2021.

Mr. Barrack became Colony CEO in November following the resignation of former CEO Richard Saltzman.

Mr. Ganzi, Mr. Barrack, the Colony board and executive team will focus on Colony’s strategic plan that includes selling non-core assets, increasing investment management and maintaining the Colony’s real estate investment trust status, according to a news release.

“As our experiential world gives way to a new future — a data-driven world — real estate in its current format with long-dated contractual revenue streams from traditional tenants will have to change and adapt or face substantial obsolescence,” Mr. Barrack said in a statement in a news release.

“Data-driven decisions, shared space utilization, ‘everything-as-a-service,’ new communications networks, and last-mile delivery systems, are examples of new technologies (that) will disintermediate everything in their paths. In fact, location, location, location is giving way to connect, connect, connect.”

Colony and Digital Bridge were already in a joint venture, Digital Colony Management, a manager that invests in global digital infrastructure. In May, Digital Colony Partners, the venture’s inaugural fund, closed with $4.05 billion.

Prior to the merger Colony had $43 billion in AUM. Digital Bridge is expected to manage nearly $20 billion directly and through Digital Colony Partners and upon the close of Digital Colony and private equity firm EQT Partners’ $14.3 billion acquisition of U.S. communications infrastructure provider Zayo Group Holdings Inc.

The $325 million purchase price is made up of two-thirds cash and one-third units of limited-partnership interest in Colony’s operating partnership. Digital Bridge Holdings’ principals retained their equity investments and carried interest in existing Digital Bridge funds and vehicles and in Digital Colony. Messrs. Ganzi and Jenkins have entered into employment agreements with Colony with five- and three-year terms, respectively.

“Our combined vision will focus on the reality that ever-larger numbers of people will use ever more devices, and the true explosion of use, driven by interconnected devices, cloud computing, mobility, big data, the internet of things and especially the 5G rollout, is still to come,” Mr. Ganzi said in the news release.