Savvis wins bid for assets of Cable & Wireless USA and Cable & Wireless Internet Services for $155M in cash and liabilities of $12.5M

January 23, 2004

7 Min Read

ST. LOUIS -- SAVVIS Communications Corporation (NASDAQ: SVVS), a leading global managed IP and managed hosting services provider, today announced that it has been selected to acquire substantially all of the assets of Cable & Wireless USA, Inc. and Cable & Wireless Internet Services, Inc. ("Cable & Wireless America" or "CWA") for $155 million in cash and assumed liabilities of approximately $12.5 million. CWA, wholly-owned subsidiaries of Cable and Wireless plc (NYSE: CWP; LSE: CW), filed for protection under Chapter 11 of the U.S. Bankruptcy Code in December of 2003 and conducted an auction completed yesterday for its business operations, for which SAVVIS submitted the winning bid.

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.

Under the proposed terms of sale with CWA, SAVVIS will purchase substantially all of CWA's assets, including CWA's:

  • World Class 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

  • Comprehensive 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.

With the addition of the CWA network and hosting assets to SAVVIS' existing world class IP network and hosting business, SAVVIS becomes one of the world's 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 CWA 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.

Commenting on the successful bid, SAVVIS' chairman and chief executive officer Rob McCormick said, "We are extremely excited about joining Cable & Wireless America's 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. The companies' network and hosting operations are extremely complementary with one another and with the SAVVIS vision to provide the industry's 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."

"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," said 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."

Financial Terms

SAVVIS' purchase will be backed by committed financing from Welsh, Carson, Anderson & Stowe ("WCAS") and Constellation Ventures ("Constellation") and the anticipated proceeds of the sale-leaseback transaction. Upon consummation of the sale leaseback transaction, WCAS and Constellation will provide funding consisting of approximately $170 million in subordinated debt facilities (the "Shareholder Notes" or "Notes"), which the company will use to acquire the CWA assets and fund ongoing capital expenditures and working capital needs of the newly acquired assets. The Shareholder Notes mature five years from the date of initial funding and are subject to redemption by SAVVIS at any time in the first 360 days after the initial funding in an amount equal to the accreted value. During the first 360 days after the initial funding, the Notes will bear interest at 12.5%, payable semi-annually in kind, and are subject to redemption at any time. After 360 days the interest rate will increase to 15%, payable semi-annually in kind. The Notes are redeemable at 101% after the fourth anniversary of the initial funding. In conjunction with this financing, SAVVIS will also issue warrants to purchase 110 million shares of its common stock with a strike price of $1.63.

The proposed purchase is subject to approval by the US Bankruptcy Court, a hearing for which is scheduled for later today, and customary regulatory approvals and closing conditions. It is currently expected to close in the first quarter of 2004. If the transaction does not close by March 5, 2004, CWA will have the right to terminate the Asset Purchase Agreement to be executed in connection with the transaction. In conjunction with this bid, SAVVIS made a $5.0 million required deposit into escrow, which is subject to forfeiture to CWA if the transaction is terminated as a result of SAVVIS breaching any material representation, warranty, or covenant in the Asset Purchase Agreement.

In a separate release:

RESTON, Va. -- Cable & Wireless USA, Inc. and Cable & Wireless Internet Services, Inc., together with certain of their subsidiaries, (together 'CWA') today announced that they have accepted a bid submitted by SAVVIS Communications Corporation (Nasdaq: SVVS) ('SAVVIS') in the court-supervised sale of their hosting and IP solutions businesses. Under terms of the accepted bid, SAVVIS will acquire substantially all of the CWA assets for $155 million in cash and assumed liabilities of approximately $12.4 million, subject to court and certain regulatory approvals.

CWA will seek court approval for the proposed sale transaction with SAVVIS at a hearing scheduled for 10 AM on January 23, 2004 at the U.S. Bankruptcy Court in Phoenix, Arizona. If approved at that time, the sale transaction is expected to close in February.

SAVVIS, one of the largest global managed service providers, delivers IP VPNs (Internet protocol virtual private networks), managed hosting and Internet services to enterprises around the world through an IP infrastructure spanning 45 countries.

CWA will continue normal operations pending completion of this proposed sale. CWA remains focused on its core competencies of hosting and IP services while delivering uninterrupted service to its customers.

John S. Dubel, CWA's chief executive officer, said: "Both CWA and SAVVIS are excited about this acquisition and are committed to growing the combined business. Fulfilling the needs of our customers remains our number one objective. The conclusion of the auction represents a very positive outcome for our customers as well as for our creditors. Our products and market position are strong, our technology is leading edge, and our commitment to providing outstanding customer service is firm. We look forward to completing the sale transaction."

On December 8, 2003, CWA announced that it had entered into an asset purchase agreement with an affiliate of Gores Technology Group, LLC for the sale of its hosting and IP solutions businesses. In accordance with the terms of this agreement and to facilitate a sale transaction, CWA filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code. In compliance with Section 363 of the Bankruptcy Code, qualifying bidders then had an opportunity to submit higher and better offers for CWA's evaluation through a court-supervised competitive bidding process. SAVVIS was chosen as the winner among seven bidders at a two-day auction concluded on January 22, 2004, by CWA's financial advisor, The Blackstone Group, pursuant to the sales procedures approved by the U.S. Bankruptcy Court. The sale proceeds from this process will be applied toward certain outstanding liabilities.

Savvis Communications Corp.

Cable & Wireless plc

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