CenturyLink, the third-largest U.S. telecommunications company, announced Wednesday that it will acquire cloud provider Savvis. The deal is valued at about $2.5 billion, with CenturyLink paying about $40 a share for Savvis and assuming about $700 million in debt.
The share price, to be paid in cash and stock, is about 11 percent over Savvis' closing price on Tuesday. CenturyLink said the acquisition will allow it to achieve global scale as a managed hosting and colocation provider, thus enabling it to "accelerate its ability to deliver quality managed hosting and cloud capabilities to its business customers."
Glen F. Post III, CEO and president of CenturyLink, told news media that "businesses are shifting the way they manage their information-technology services and infrastructure," adding that this acquisition helps meet those needs by offering "Savvis' leading products and services, coupled with CenturyLink's network."
Savvis Chairman and CEO James M. Ousley said the combination of "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."
Combined, the two companies will operate 48 data centers in North America, Europe and Asia with more than 1.9 million square feet of floor space, a national 207,000-mile fiber network, and a 190,000-mile global access network. The companies said the customer list will now include a majority of the Fortune 1000 companies, and the combined employment will be about 50,000 people.
CenturyLink said it will integrate its hosting business and Savvis' managed hosting and cloud services into a single business unit under the CenturyLink name. The hosting business will be based in St. Louis, and the leadership will be provided primarily by members of the Savvis executive team, with Ousley heading up the unit.
The Savvis acquisition is the latest in a buying spree among telecommunications providers, with an emphasis on purchases of cloud providers. Recently, Verizon bought Terremark for $1.4 billion. Terremark competes with Savvis, as well as with other cloud providers such as Amazon Web Services, and Verizon's purchase was seen as part of its intention to become a larger player in cloud computing for enterprises.
Earlier this year, Time Warner Cable completed a $230 million deal to acquire Navisite. And earlier this month, CenturyLink completed its purchase of Qwest Communications in a $10.6 billion deal.
CenturyLink, headquartered in Monroe, La., provides broadband, voice and wireless services for consumer and business customers. Its brands include Prism TV and DIRECTV, and it also offers data, voice and managed services through a fiber-optic network.
Savvis provides cloud infrastructure and hosted IT solutions for businesses and has about 2,500 clients, including 32 from the top end of the Fortune 500.