When companies enter into mergers or into an agreement to be acquired, it’s generally expected to be a good deal for both parties. That might not mean that both stocks trade higher on the announcement itself, and it is very common for an acquiring company to see its shares take a hit over potential dilution, charges and integration periods. There are other cases when mergers are just given a thumbs-down reaction, and getting technology teams from two separate companies in the same field, and from different parts of the world, can come with even larger integration risks.

Digital Realty Trust Inc. (NYSE: DLR) is now set to acquire Interxion Holding N.V. (NYSE: INXN) in a deal valued at roughly $8.4 billion of total enterprise value. The move would give the combined company a formidable position among the data-center solution providers in major European cities. The move looks impressive if you overlap and combine the footprints, but some investors looking at the reaction now may be left with a feeling that the best days have been seen already, ahead of the merger.

While the move is set to create a top provider for data-center, colocation and interconnection solutions, the terms of the merger look weaker than some investors have might have expected.

According to the actual news release, Interxion shareholders expect to receive a set ratio of 0.7067 Digital Realty shares per Interxion share — or roughly $93.48 per ordinary share based on prior closing prices. That is a very low premium to the $89.42 prior close and is down from its 52-week high of $102.66.

One issue that Interxion may have in its favor is that its shares were between $12.00 and $20.00 for most of 2011 and 2012. the company could argue this is an exit very close to the peak for all shareholders, and the company can argue that the all-stock transaction also allows shareholders to remain in the merged company for future potential upside if they choose to not sell their shares. And as of the announcement date, Interxion shareholders would own approximately 20% of the outstanding common shares of the combined company after the merger closes.

The flip side is that companies often get trounced by shareholders and sued by law firms when they sign mergers that do not create large rewards for their shareholders upon the exit. Interxion shares were last seen down 2.2% at $87.46 on Wednesday, and Digital realty shares were down 2.8% at $126.95 (versus a 52-week high of $136.32). Not a very impressive vote, even if it is on the heels of an earnings announcement.

What’s also at stake here is that the merger is subject to customary closing conditions and to approval by shareholders of both companies. Interxion is based in and operates in the Netherlands, with a total of 13 metropolitan areas, including in France, Germany, the United Kingdom, Austria, Belgium, Denmark, Ireland, Spain, Sweden and Switzerland.

Interxion had a pre-merger market cap of about $6.8 billion, compared with about $27 billion from Digital Realty. Digital Realty’s established presence in London and Dublin will be greatly enhanced by the addition of the Interxion presences throughout Europe, and the companies indicated that the merger would allow them to have access to approximately 70% of the gross domestic product in Europe. That is not the same in market share of course, but many investors have every right to assume that European regulators would be protective about a powerful European company now being under an American technology operator.

While the shares of Digital Realty have so far traded slightly lower, William Blair raised its rating to Outperform from Market Perform and Wells Fargo reiterated its Outperform rating and raised its target to $140 from $122.

Refinitiv was calling for revenue growth at Interxion to be over 11% in 2019 (to $702 million in dollar terms) and over 14% in 2020 (to about $803 million in dollar terms), with Digital Realty revenues expected to rise 6.5% to $3.24 billion in 2019 and then 5.2% to $3.41 billion in 2020. Digital Realty’s trailing annualized revenue gains (rounded) were 24% in 2018, 15% in 2017 and 21.5% in 2016.

Digital Realty shares peaked closer to $133 earlier in October, and its shares were up about 22% so far in 2019. The problem that appears on the surface is that the merger is a “Low/No Premium” deal for Interxion shareholders at a time when organic revenue expectations are slowing handily for Digital Realty.

This may be a better deal for Digital Realty’s effort to acquire growth and to expand its footprint, but Interxion shareholders may not find the combined growth story as alluring.

Digital Realty’s investment grade balance sheet and lower cost of capital were cited as a key benefit in the announcement. Digital Realty Chief Executive Officer A. William Stein said of the transaction:

This strategic and complementary transaction builds upon Digital Realty’s established foundation of serving market demand for colocation, scale and hyperscale requirements in the Americas, EMEA and Asia Pacific and leverages Interxion’s European colocation and interconnection expertise, enhancing the combined company’s capabilities to enable customers to solve for the full spectrum of data center requirements across a global platform. The transaction is expected to be accretive to the long-term growth trajectory of the combined organization, and to establish a global platform that we believe will significantly enhance our ability to create long-term value for customers, shareholders and employees of both companies.

As for customers interfacing with the combined companies, the move would leave Digital Realty’s CEO as chief executive of the combined company and Interxion CEO David Ruberg will stay on as the chief executive of the combined operations throughout Europe, Middle East & Africa. The name in those markets will be “Interxion, a Digital Realty Company” after the transaction closes.

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