CenturyLink Buys IT Infrastructure Services Company Savvis In $2.5B Deal

CenturyLink this morning announced that it will acquire all outstanding shares of Savvis common stock in a cash and stock merger valued at $40 per share, or a total of approximately $2.5 billion, plus net debt of approximately $0.7 billion which will be assumed or refinanced at close.

CenturyLink is the third largest telecommunications company in the United States, providing a range of broadband, voice and wireless services to consumers and businesses across the entire country. The company just merged with Qwest in a stock-for-stock transaction.

Savvis provides cloud infrastructure and hosted IT solutions for enterprises.

Under the terms of the transaction, Savvis stockholders will receive $30 per share in cash and $10 in shares of CenturyLink common stock. The consideration represents an 11 percent premium over Savvis’ closing stock price as of the close of trading on April 26, 2011.

With the addition of the company, CenturyLink says it aims to achieve global scale as a managed hosting and colocation provider to its existing and potential new business and government customers. CenturyLink anticipates integrating its hosting business and Savvis’ managed hosting and cloud services into a single CenturyLink business unit.

Together, CenturyLink and Savvis say they 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 national 207,000 route mile fiber network and a 190,000 mile global access network.

CenturyLink expects to realize approximately $70 million in full run-rate annual operating cost and capital expenditure synergies. The transaction is expected to be accretive to CenturyLink’s free cash flow per share in the first full year following the close.

The integrated hosting business will be based in St. Louis and led primarily by key members of the Savvis leadership team, including CEO James Ousley, who will head the unit. Following the closing of the transaction, CenturyLink will employ approximately 50,000 people.

The companies anticipate closing the transaction in the second half of 2011.

CenturyLink notes that it has received a commitment letter from Bank of America Merrill Lynch and Barclays Bank for bridge debt facilities aggregating up to $2 billion to fund a portion of the acquisition and refinancing of Savvis’ current debt.