Telco CenturyLink has agreed to buy data centre provider Savvis in a US$2.5bn cash and stock merger. The deal is valued at US$40 per share plus net debt of approximately $0.7bn, which will be assumed or refinanced at close.
CenturyLink said it had…
Telco CenturyLink has agreed to buy data centre provider Savvis in a US$2.5bn cash and stock merger. The deal is valued at US$40 per share plus net debt of approximately $0.7bn, which will be assumed or refinanced at close.
CenturyLink said it had received a commitment letter from BoA Merrill Lynch and Barclays Bank for bridge debt facilities aggregating up to US$2bn to fund a portion of the acquisition and refinancing of Savvis’ current debt.
The deal is expected to close in H2 2011.
Savvis shareholders will receive US$30 per share in cash and US$10 in shares of CenturyLink common stock, subject to adjustments, an 11% premium over Savvis’ closing stock price as of the close of trading on 26 April and a premium of 53% compared to Savvis’ stock price at the beginning of the year.
CenturyLink said it believes the acquisition will improve its revenue, EBITDA and free cash flow growth profile, and that it expects to realise approximately US$70m in full run-rate annual operating cost and capex synergies.
The buyer plans to integrate its own hosting business and Savvis’ managed hosting and cloud services into a single CenturyLink business unit, which will be based in St. Louis and led by Savvis CEO James Ousley. The company’s combined staff currently numbers 50,000.
With the acquisition, CenturyLink aims to become a global provider of managed hosting, cloud and colocation services for business customers. According to a statement, the two companies will operate 48 data centres in North America, Europe, and Asia with more than 1.9 million square feet of gross floor space; a 207,000-mile national fibre network; a 190,000 mile global access network; and a blue-chip customer list.
CenturyLink has entered into an agreement with Welsh, Carson, Anderson & Stowe VIII, and related parties who collectively own approximately 23% of Savvis’ outstanding stock to vote their shares in favour of the transaction.
CenturyLink was financially advised by Barclays Capital and BofA Merrill Lynch, and legally advised by Wachtell, Lipton, Rosen & Katz and Jones, Walker, Waechter, Poitevent, Carrere & Denegre. Savvis was advised by Morgan Stanley and Wilson Sonsini Goodrich & Rosati.
