In the latest sign of a shopping frenzy in the Web host sector as cloud computing becomes an increasingly central part of the technology business,CenturyLink this morning agreedto buy Savvis for $40 a share, including $30 in cash and $10 in CenturyLink common shares. The deal is valued at $2.5 billion, plus the assumption of $700 million in debt.
The price tag is a modest 11% premium to yesterday’s closing price, but it comes 53% above the price of Savvis shares at year end, which have been inflated by speculation – accurate, as it turns out – that the company was in play.
Speculation on a possible deal for Savvis cropped up following other signs of consolidation in the Web hosting and data center sector. In January,Verizoncut a deal to buy Terremark for $1.4 billion; a month later, Time Warner Cableagreed to buy NaviSite for $230 million. As I wrote in a blog post following the Time Warner deal, the Street began to see Savvis as the next one to go.
CenturyLink, which recently acquired Qwest, said the deal will give the company “global scale as a managed hosting and colocation provider and will accelerate its ability to deliver quality managed hosting and cloud capabilities to its business customers.”
After the deal, the company said, it will have 48 data centers in North America, Europe and Asia, with more than 1.9 million square feet of gross floor space.
CenturyLink said the deal is expected to improve its revenue, EBITDA and free cash flow. The company expects $70 million in operating cost and capital spending synergies. The deal is expected to be accretive to free cash flow ex integration costs in the first full year following the close.
The company after the deal closes will have about 50,000 employees.
The deal is taxable to Savvis holders for federal income tax purposes. The transaction, which is subject to various regulatory approvals, is expected to close in the second half. The company said it has a commitment from Bank of America Merrill Lynch and Barclays Bank for up to $2 billion in funding to help pay for the deal and to refinance Savvis’ debt.
SVVS this morning is up $3.04, or 8.5%, to $39.06.
Meanwhile, the Street is trying to guess the next target in the sector. Among other Web hosting companies:
The price tag is a modest 11% premium to yesterday’s closing price, but it comes 53% above the price of Savvis shares at year end, which have been inflated by speculation – accurate, as it turns out – that the company was in play.
Speculation on a possible deal for Savvis cropped up following other signs of consolidation in the Web hosting and data center sector. In January,Verizoncut a deal to buy Terremark for $1.4 billion; a month later, Time Warner Cableagreed to buy NaviSite for $230 million. As I wrote in a blog post following the Time Warner deal, the Street began to see Savvis as the next one to go.
CenturyLink, which recently acquired Qwest, said the deal will give the company “global scale as a managed hosting and colocation provider and will accelerate its ability to deliver quality managed hosting and cloud capabilities to its business customers.”
After the deal, the company said, it will have 48 data centers in North America, Europe and Asia, with more than 1.9 million square feet of gross floor space.
CenturyLink said the deal is expected to improve its revenue, EBITDA and free cash flow. The company expects $70 million in operating cost and capital spending synergies. The deal is expected to be accretive to free cash flow ex integration costs in the first full year following the close.
The company after the deal closes will have about 50,000 employees.
SVVS this morning is up $3.04, or 8.5%, to $39.06.
Meanwhile, the Street is trying to guess the next target in the sector. Among other Web hosting companies:
- Internap is up 39 cents, or 5.3%, to $7.75.
- Rackspace is up 87 cents, or 2%, to $44.81.
- Equinix is up $1.31, or 1.4%, to $95.10.
