The recovery of interest in telecommunications assets is gathering pace. SAVVIS Communications Corporation, the NASDAQ-listed managed IP and hosting services provider, on Friday acquired the assets of Cable & Wireless USA and Cable & Wireless Internet Services Inc for $155 million in cash and assumed liabilities of approximately $12.5 million. The Cable & Wireless businesses, which were in Chapter 11, were auctioned, and SAVIS submitted the winning bid out of seven submitted. Gores Technology had earlier offered to pay $125 million if and when the assets emerged from Chapter 11.
SAVVIS shareholders Welsh, Carson, Anderson & Stowe and Constellation Ventures, a Bear Stearns asset management fund, have committed to finance the purchase price and provide ongoing funding to support the acquired assets. In addition, SAVVIS has entered into a Letter of Intent with Du Pont Fabros Interests LLC (“DuPont”) pursuant to which SAVVIS will sell its rights to acquire five of the CWA data centers to DuPont for $52 million, and to leaseback those data centers for 15 years.
SAVVIS is purchasing Cable & Wireless’s Tier 1 IP Network, serving more than 2,000 enterprise customers, with a footprint encompassing 27% of all Internet routes and providing a range of IP network services from public Internet to private lines, and its Hosting Services, with more than 1,000 enterprise customers, 15 data centers, a Fortune 500 focus, and a complete range of managed hosting, consulting and infrastructure services. SAVVIS has now become one of the worlds largest IP/hosting infrastructure providers. The acquired assets will add over 5,000 customers and the combined entity is currently projected to have annualized revenues of approximately $700 million by year end 2004.
The purchase of the assets will enable SAVVIS to expand its range of IP network services to include private line services and an expanded range of consulting and hosting infrastructure services. The company currently projects that substantial infrastructure and operating synergies could be generated by this acquisition through the optimization of the combined network and hosting operations and the elimination of duplicate staff functions.
“We are extremely excited about joining Cable & Wireless Americas internet and complex hosting capabilities to our leading private network and hosting business, and we look forward to bringing new levels of service and quality to the combined customer base,” says SAVVIS chairman and chief executive officer Rob McCormick. “The companies network and hosting operations are extremely complementary with one another and with the SAVVIS vision to provide the industrys first truly virtualized managed services infrastructure. Enterprises are beginning to recognize the benefits of virtualization as they struggle with maximizing utilization of their IT infrastructure. SAVVIS acquisition of these network and hosting assets significantly expands our ability to deliver the full range of value added, managed utility services based on our virtualized approach.”
Cable & Wireless built up the US assets at the height of the Internet boom. The company sank an estimated 9 billion into its strategy of becoming a global Internet carrier. The failed venture cost former CEO Graham Wallace his job in July last year.
“The combination of SAVVIS unique virtualized and utility-based global services, combined with the CWA Tier 1 IP network and hosting infrastructure, will further accelerate and enhance the set of valued added products the company is already providing to multiple vertical industries, such as Financial Services, Media, Healthcare, and Retail,” adds Clifford H. Friedman, senior managing director, Constellation Ventures, and member of SAVVIS’ Board of Directors. “We believe this combination will yield superior performance and economics for these various vertical industry customers, positioning SAVVIS as an integral partner with their customers.”