CenturyLink Bids $2.5 Billion for Savvis, an IT Services Provider

Acquisition at $40 per share in cash and stock represents 53 percent premium over company’s stock price at the beginning of the year. Companies to create new business unit for managed hosting and cloud services.

CenturyLink Inc., at $7 billion in annual sales the third largest telecommunications provider in the U.S., said that it bid $2.5 billion, or $40 per issue, for the outstanding shares of Savvis Inc., a $930 million IT solutions and services provider based in Town and Country, MO.

Under terms of the deal, Savvis shareholders will receive $30 per share in cash and $10 in share of CenturyLink common stock. Officials said that the share price offer amounts to a 53 percent bump over the trading price of Savvis issues at the beginning of this year and an 11 percent premium over the closing price on April 26, 2011.

The transaction, which is expected to close in the second half of 2011, is subject to the approval of Savvis shareholders and customary regulatory review, including the U.S. Federal Communications Commission (FCC) and international regulators, officials said.

CenturyLink said that it already has secured an agreement with a group of shareholders who collectively own about 23 percent of Savvis’ outstanding stock to vote their shares in favor of the deal.

The transaction includes about $700 million of Savvis debt, which CenturyLink said it will assume or refinance at the close of the transaction. The company said that it has a commitment letter from Bank of America Merrill Lynch and Barclays Bank PLC for a bridge loan up to $2 billion to finance the acquisition including refinancing of Savvis’ current debt.

New business unit headed by Savvis chief executive

CenturyLink officials said that the play for Savvis will give it global scale as a managed hosting and collocation provider and will hasten its ability to provide managed hosting and cloud computing services to its customers.

The company said that it will combine its hosting business and Savvis’ managed hosting and cloud services into one St. Louis-based business unit headed by key James Ousley, Savvis chief executive.

“The transaction creates a premier managed hosting and colocation provider with global scale in a high growth sector, and is expected to be accretive to revenue growth and cash flow per share,” said Glen F. Post, III, CenturyLink chief executive officer and president.

“Today, businesses are shifting the way they manage their information technology services and infrastructure, and this transaction helps us meet these needs by offering Savvis’ leading products and services coupled with CenturyLink’s network,” he said.

The companies said that together they will operate 48 data centers in North America, Europe and Asia with more than 1.9 million square feet of floor space and command a customer list of big name players in the Fortune 500 and Fortune 1000 segments.

“As migration to cloud-based services continues to accelerate rapidly, a strategic combination was a natural choice to create significant scale and become part of a large global network for the benefit of our customers, stockholders and employees,” said Ousley.

“We believe that combining our proven capabilities in cloud infrastructure and managed hosting with CenturyLink’s hosting assets and large base of business customers will create powerful opportunities to accelerate growth,” he said. “We also look forward to making the full resources of a much larger network infrastructure available to our customers.”

CenturyLink said that the deal will save it some $70 million annually in operating costs and capital expenditures. Following the closing of the transaction, the company said that it will employ some 50,000 people.

TAGS: cloud services,acquisition,CenturyLink,Savvis,telecommunication

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