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CenturyLink Set to Acquire Savvis for $2.5 Billion

 
The New York Times
By DEALBOOK

Edited by Andrew Ross Sorkin

April 27, 2011

CenturyLink, the nation’s third largest telecommunications company, announced on Wednesday that it would buy the information technology firm Savvis for $2.5 billion, in a play on so-called cloud computing.

Under the terms of the deal, CenturyLink will pay $40 a share for Savvis, 11 percent above the stock’s closing price on Tuesday. CenturyLink will also assume $700 million in debt.

Cloud computing has been an active space for deal-making. Hewlett-Packard, EMC and Dell have been scrambling to buy storage makers. In January, Verizon Communications said it would acquire Terremark Worldwide for $1.4 billion.

By adding Savvis, CenturyLink will expand its data storage services for global companies. The combined company will have 48 data centers around the world, with 1.9 million square feet of floor space.

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

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

Earlier this month, CenturyLink completed its acquisition of Qwest Communications, a $10.6 billion deal in the rapidly consolidating telecommunications sector. The combined company had revenue of $18.7 billion and earnings of $8.1 billion for 2010.

Bank of America Merrill Lynch and Barclays Bank have agreed to provide up to $2 billion of bridge loans to help finance the acquisition and refinance some of Savvis’s debt.

Barclays Capital and Bank of America Merrill Lynch served as financial advisers for CenturyLink, while Wachtell, Lipton, Rosen & Katz and Jones, Walker, Waechter, Poitevent, Carrere & Denegre provided legal services. Savvis’s advisers were Morgan Stanley and the law firm Wilson Sonsini Goodrich & Rosati.