More consolidation:
CenturyLink to buy Savvis for $2.5 billion
On Wednesday April 27, 2011, 7:37 am
(Reuters) - Rural telephone service provider CenturyLink Inc (NYSE:CTL - News) is to buy Savvis Inc (NasdaqGS:SVVS - News) for about $2.5 billion in cash and stock to beef up its data centers business as it looks to meet the growing demand for cloud-based services.
Data center operators -- an important part of the fledgling cloud computing infrastructure -- have seen a spurt of deals in the last one year, including the recent Verizon Communications' (NYSE:VZ - News) buy of Terremark Worldwide.
CenturyLink will pay Savvis stockholders $30 per share in cash and $10 in shares, and will take on debt of about $700 million.
The offer is 11 percent more than Savvis' Tuesday close on Nasdaq.
CenturyLink said it would merge its hosting operations with Savvis' managed hosting and cloud businesses and the segment will be headed by Savvis CEO James Ousley.
The combined company will operate 48 data centers in North America, Europe and Asia.
CenturyLink expects to save about $70 million in full run-rate annual operating cost and capital expenditure, it said in a statement.
CenturyLink, which expects the deal to add to its free cash flow per share, said the acquisition would help improve its revenue, EBITDA and free cash flow growth profile.
CenturyLink had Barclays Capital and BofA Merrill Lynch as financial advisers and Wachtell, Lipton, Rosen & Katz and Jones, Walker, Waechter, Poitevent, Carrere & Denegre as legal advisers.
Shares of Savvis closed at $36.02 on Tuesday on Nasdaq, while those of CenturyLink closed at $40.32 on Tuesday on the New York Stock Exchange.
(Reporting by Saqib Iqbal Ahmed in Bangalore; Editing by Sriraj Kalluvila and Saumyadeb Chakrabarty)
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