CenturyLink, fresh off its acquisition of Qwest Communications, on Wednesday announced plans to purchase Savvis, a provider of cloud infrastructure and hosted IT solutions for enterprises.
The agreement calls for CenturyLink to acquire the outstanding shares of Savvis’ common stock in a cash and stock merger valued at $2.5 billion, or $40 per share. CenturyLink also will assume about $700 million in net debt.
CenturyLink said the acquisition will enable it to “achieve global scale as a managed hosting and colocation provider," accelerating its ability to offer managed hosting and cloud services to businesses.
Missouri-based Savvis (NASDAQ: SVVS) serves about 2,500 customers, including 32 of the top 100 companies in the Fortune 500, according to its website.
The combined company will operate 48 data centers in North America, Europe and Asia with more than 1.9 million square feet of gross floor space, and CenturyLink said it anticipates integrating its hosting business and Savvis’ managed hosting and cloud services operations into a single business unit.
The announcement today coincided with Savvis’ 2011 first-quarter results in which the company reported a net loss of $1.8 million, or $0.03 per share, on revenues of $257 million. Hosting, including managed services ($92.3 million) and colocation ($99.6 million), comprised the lion’s share ($191.9 million) of Savvis’ revenues.
Monroe, La.-based CenturyLink said it expects the acquisition to improve its revenues, free cash flow and earnings before interest, taxes, depreciation and amortization.
Earlier this month, CenturyLink announced completing the acquisition of Denver-based Qwest in a merger that it said creates the third-largest telecommunications provider in the United States with operations in 37 states. The merger was completed about two weeks after AT&T revealed a controversial agreement to acquire T-Mobile USA for $39 billion, potentially further consolidating power among the nation’s largest telecommunications companies.
CenturyLink anticipates closing the acquisition of Savvis in the second half of 2011 following regulatory approvals and other closing conditions. CenturyLink said it has received a commitment letter from Bank of America Merrill Lynch and Barclays Bank PLC for bridge debt facilities aggregating up to $2 billion to fund a portion of the acquisition and refinance Savvis’ current debt.