CenturyLink to acquire Savvis for $2.5 billion

27 April 2011 | Kavit Majithia


US based telecoms company CenturyLink is to acquire cloud and infrastructure services company Savvis in a deal valued at $2.5 billion.

Under the terms of the agreement, Savvis shareholders will receive $40 per share, and CenturyLink will assume $700 million of the company’s existing debt. CenturyLink, presently the third largest telecoms company in the US claims the acquisition will give it global scale as a managed hosting and collocation provider, and accelerate its cloud capabilities, which will enable it to compete with Verizon Communications. Verizon only recently acquired Savvis’s competitor in the enterprise service space, Terremark Worldwide in January 2011 for $1.4 billion.

“This transaction creates a premier managed hosting and collocation provider with global scale in a high growth sector, said Glen F. Post, CEO and president at CenturyLink. “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.”

Together, the companies will operate 48 data centres across north America, Europe and Asia with a route mile fibre network spanning 207,000 miles, a 190,000 mile global access network and 1.9 million sq ft of floor space. It is expected the CenturyLink’s hosting business will be integrated with Savvis’ managed hosting and cloud services to operate as one single unit, and will be led by Savvis CEO James Ousley,

“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,” says Ousley. “We believe that combining our proven capabilities in cloud infrastructure and managed hosting with CenturyLink’s hosting assets and large base of business customers will create powerful opportunities to accelerate growth.”

Earlier this month, CenturyLink completed its $10.6 billion acquisition of Qwest Communications, as the US telecoms market continues its rapid consolidation. Mike Sapien, principal analyst at Ovum believes that with the integration of Qwest not nearly complete, it is difficult to judge the impact of CenturyLink’s latest acquisition. “On the surface, both deals have the ingrediants of creating a global challenger but the major focus and customer base remains in the US and European regions,” he said. “This is an aggressive move into the higher end of the enterprise market with the fast growing managed, hosted and cloud services. It is also worth noting that this is not a done deal and there is a lot of work to be done for CenturyLink to assemble the Qwest and Savvis business assets into one cohesive and competitive national offer before it can create its global offer.”