April 27, 2011 – CenturyLink, fresh off completing its acquisition of Qwest Communications, said it signed an agreement to purchase data center operator Savvis for $2.5 billion.
Savvis operates 31 data centers worldwide with 1.5 million square feet of raised floor space, including a center in Weehawken, N.J., that is home to the Z and Y exchanges operated by BATS Global Markets, among other customers. Qwest operates 17 data centers, including one near Denver that serves Fidelity Investments.
CenturyLink said it will acquire all outstanding shares of Savvis common stock in a cash and stock merger valued at $40 per share. The Monroe, La., communications company also will take on $700 million of debt from Savvis.
Savvis stockholders will receive $30 per share in cash and $10 in shares of CenturyLink common stock. The combination represents an 11 percent premium over Savvis' closing stock price of $36.021 at the close of trading on April 26 and a premium of 53 percent compared to Savvis' stock price at the beginning of the year.
CenturyLink said the merger will allow make it a global playing in managed hosting, cloud and co-location services.
"The transaction creates a premier managed hosting and colocation provider with global scale in a high growth sector," said Glen F. Post, III, CenturyLink chief executive officer and president. "
"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 James E. Ousley, chairman and chief executive officer of Savvis.
If combined, CenturyLink and Savvis will operate 48 data centers located in North America, Europe, and Asia with more than 1.9 million square feet of gross floor space. They will operate a national 207,000 route mile fiber network; and a 190,000 mile global access network.
The acquisition of Savvis is expected to improve CenturyLink's revenue, which last year hit $5 billion, as well as its cash flow and earnings.
CenturyLink anticipates integrating its hosting business and Savvis' managed hosting and cloud services into a single CenturyLink business unit.
The hosting business will be based in St. Louis and led primarily by Savvis executives, including Savvis CEO James Ousley.
On April 1, CenturyLink completed a pending merger with Qwest Communications today completed their merger, creating the nation's third largest telecommunications company in the United States.
That greatly boosted CenturyLink's size. CenturyLink said the combined company had revenues of $18.6 billion, adjusted EBITDA of $8.1 billion and adjusted free cash flow of approximately $3.1 billion for the twelve months ended Dec. 31, 2010.
In that merger, the Qwest name was to disappear. The combined company will use the name CenturyLink, although the Qwest brand will continue to be used in former Qwest markets for several months.
Qwest operates 17 data centers it calls "cyber centers,'' which have included under its roofs such customers as Fidelity Investments, eBay and Hewlett-Packard Co.
This story originally appeared on Securities Technology Monitor.