CenturyLink to use cash, debt to acquire Savvis in $2.5 billion deal

By Jennifer Lanning Drey

Savannah, Ga., April 27 - CenturyLink, Inc. announced plans on Wednesday to acquire Savvis, Inc. in a cash and stock merger valued at $2.5 billion plus the assumption of $700 million of net debt.

In exchange for each Savvis share, Savvis shareholders will receive $30 cash and $10 in shares of CenturyLink common stock.

CenturyLink will use a combination of cash on hand and debt to fund the cash payment, Glen F. Post III, its chief executive officer, said during a Wednesday conference call held to discuss the proposed transaction.

Specifically, CenturyLink has secured a $2 billion bridge loan facility to go along with its existing $1.7 billion undrawn revolving credit facility, Post said.

The company expects to refinance Savvis' debt, which consists primarily of a $550 million term loan, he noted.

On a pro forma basis at year-end 2010, the transaction increases CenturyLink's net leverage to 2.5 times debt to EBITDA, compared with about 2.3 times debt to EBITDA prior to the transaction, CenturyLink's chief financial officer R. Stewart Ewing Jr. said during the question-and-answer portion of the call.

The acquisition is expected to close in the second half of 2011. Post said he believes the approval process will be relatively straightforward given that there are fewer approvals required than in previous acquisitions carried out by the company.

The CEO also said he expects a straightforward integration of Savvis.

Savvis will operate as a separate business unit of CenturyLink following the close of the transaction.

'Next logical step'

Regarding the strategic rationale behind the transaction, Post said the acquisition was the next logical step in CenturyLink's transformation and will allow CenturyLink to achieve global scale as a managed hosting and collocation provider.

Additionally, it will accelerate CenturyLink's ability to deliver quality managed hosting and cloud capabilities to its business customers, the company said.

"The combination is really about growth," Post said.

The acquisition is expected to improve CenturyLink's revenue, EBITDA and free cash flow growth profile. CenturyLink expects to realize $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, excluding integration costs, in the first full year following the close.

Savvis is a Town & Country, Mo.-based provider of information technology services.

CenturyLink is a Monroe, La.-based telecommunications company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.