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April 27, 2011 1:27 PM

Wachtell and Wilson Sonsini Lead on $2.5 Billion Sale of Savvis to CenturyLink

Posted by Victor Li

Cloud computing is all the rage these days, and CenturyLink, Inc., the nation's third largest telecommunications company, has decided to get in on the action. On Wednesday, the company announced that it would purchase information technology firm Savvis, Inc., in a $2.5 billion cash and stock deal. The deal also calls for the assumption of $700 million in Savvis debt.

Wachtell, Lipton, Rosen & Katz represented CenturyLink, with corporate counsel Eric Robinson leading a team consisting of antitrust partner Ilene Gotts, employee benefits partner Michael Segal, tax partner Jodi Schwartz, and finance partner Eric Rosof. The team previously represented CenturyLink (then known as CenturyTel) in its $10.6 billion purchase of Qwest Communications in April 2010. Working alongside Wachtell was a team from Jones Walker, which has represented CenturyLink as corporate and securities counsel since 1985, led by corporate partner Ken Najder, finance partner Marshall Page III and benefits partner Timothy Brechtel. Wilson Sonsini Goodrich & Rosati chairman Larry Sonsini represented Savvis, alongside corporate partners Robert Sanchez, Warren de Wied, and Daniel Peale, IP partner James Clessuras, employee benefits partner Ralph Barry, and tax partner Eileen Marshall.

The deal is the latest in high-tech marriages between telecommunications companies and IT firms that specialize in cloud computing, which allows businesses to save money by storing information over the Internet rather than buying their own servers and data storage centers. In September, Hewlett Packard acquired data storage company 3Par for $2.4 billion, followed by IBM buying data analytics company Netezza for $1.7 billion. In January, Verizon Communications purchased IT company and cloud services provider Terremark Worldwide Inc. for $1.4 billion, while Time Warner Cable got in on the fun in February, purchasing NaviSite Inc., a company that hosts applications on remote servers, for $230 million.

"The transaction creates a premier managed hosting and colocation provider with global scale in a high-growth sector, and is expected to be accretive to revenue growth and cash flow per share," said Glen F. Post, III, CenturyLink chief executive officer and president in a statement. "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's leading products and services coupled with CenturyLink's network."

"We believe that combining our 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," said James E. Ousley, chairman and chief executive officer of Savvis, in a statement. According to the statement, CenturyLink will integrate its hosting business with Savvis's cloud services, and this integrated hosting business will be based in St. Louis with Ousley as CEO. The combined entity will now operate 48 data centers located in North America, Europe, and Asia.

Of course, cloud computing isn't without risks. Last week, a crash at Amazon's cloud services lasted several days, affecting several popular Web sites including Reddit, FourSquare, and Quora, and resulted in a small amount of permanent data loss. Additionally, security and confidentiality are major concerns. According to a recent report by Law Technology News, our sibling publication, cloud technology has gotten mixed reviews from law firms that use it.

Nevertheless, it's clear that the cloudy forecast hasn't seemed to affect business.

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