Phone company CenturyLink Inc. has agreed to buy information technology services provider Savvis Inc. for $2.5 billion in cash and stock, just a few weeks after it closed its acquisition of rival Qwest Communications International Inc.
The acquisitions come as CenturyLink works to expand its business at a time when households are steadily canceling landlines in favor of cell phones or cable phone service. Buying Qwest allowed it to cut corporate overhead by combining the third- and fourth-largest traditional phone companies into one. Buying Savvis will help the company to expand the hosting and cloud computing services it offers to business customers.
"Today, 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," the company said in a statement.
Cloud computing allows companies to store data and applications on remote servers rather than on their own computers and to access them over an Internet connection.
The deal values Savvis at $40 per share, an 11 percent premium to its closing price Tuesday. Savvis stockholders will receive $30 per share in cash and $10 in shares of CenturyLink stock.
As part of the deal, CenturyLink will also assume $700 million in Savvis debt.
Shares of St. Louis-based Savvis rose $3.17, or 8.8 percent, to $39.19 in morning trading, a 52-week high. Shares of Monroe, La.-based CenturyLink shares slipped 29 cents to $40.03 a share.
CenturyLink plans to meld its hosting business and Savvis' managed hosting and cloud services into a single business unit based in St. Louis. It will be led by top Savvis executives including CEO James Ousley.
Together, CenturyLink and Savvis will operate 48 data centers located in North America, Europe, and Asia. They will have 50,000 combined employees. The transaction still needs approval from antitrust regulators and Savvis stockholders. It's expected to close in the second half of this year.
Separately, Savvis posted a first-quarter net loss of $1.8 million, or 3 cents per share, compared with a net loss of $11.3 million, or 21 cents per share, in the same period a year earlier. Its revenue grew rose 19 percent to $257 million from $216.6 million.
Analysts, on average, had expected a net loss of 10 cents per share on revenue of $256 million, according to a poll by FactSet.