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CenturyLink to Acquire Savvis for $2.5 Billion in Cash

April 28, 2011

CenturyLink, USA’s third largest telecommunications company recently announced that it is going to acquire the cloud infrastructure and hosted IT solutions provider, Savvis, Inc for $2.5 billion in cash. The takeover is expected to support the company’s global expansion ambitions.

Through the acquisition, CenturyLink expects to improve revenue and EBITDA. The acquisition is also expected to contribute to the company’s free cash flow growth profile. In the press release, CenturyLink said that through the acquisition, the company expects to realize approximately $70 million in full run-rate annual operating cost and capital expenditure synergies.

In the release, CenturyLink revealed its plan of integrating its hosting business and Savvis' managed hosting and cloud services into a single CenturyLink business unit. By leveraging Savvis’ expertise and assets, CenturyLink, as a managed hosting and colocation provider will be able to extend its footprint across the globe. The new business unit will serve a clientele that includes a majority of the Fortune 500 and Fortune 1000 companies.

By combining its own hosting and network assets with Savvis' proven solutions in colocation, managed hosting and cloud services, CenturyLink’s anticipates to achieve a solid platform for future growth.

Together, 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; a robust, national 207,000 route mile fiber network; a 190,000 mile global access network.

The integrated hosting business will be based in St. Louis and led primarily by key members of the Savvis management, including Savvis CEO James Ousley, who will head the unit.

CenturyLink plans to employ approximately 50,000 people based on the total number of CenturyLink and Savvis employees as of April 26, 2011.

“The transaction creates a premier managed hosting and colocation 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 chief executive officer and president, commented in a statement.

He continued, “Today, businesses are shifting the way they manage their information technology services and infrastructure, and this transaction helps us meet these needs by offering Savvis' leading products and services coupled with CenturyLink's network. We look forward to working with the Savvis team to leverage CenturyLink's significant scale and scope to fully realize the potential of Savvis' capabilities for our combined customers, while also enhancing value for our shareholders and providing opportunities for our employees.”

Meanwhile, Law Offices of Howard G. Smith announced that it is investigating potential claims against the board of directors of Savvis, related to the company's agreement to be acquired by CenturyLink, Inc.

Madhubanti Rudra is a contributing editor for unified communications. To read more of her articles, please visit her columnist page.

Edited by Jennifer Russell