US phone company CenturyLink has offered to buy data center operator Savvis Inc. for $2.5 Billion today, a price that many analysts view as an undervalued bid for Savvis.
Analysts believe the CenturyLink Inc move makes good sense, as they look to join the cloud computing frenzy, as more and more consumers move away from home phones and into the internet and smartphone products and services. CenturyLink finalized its $10 billion Qwest purchase earlier this month and now is going after Savvis in an effort to boost its data center presence.
The deal involves paying $30 per share in cass to Savvis Inc. shareholders, as well as $10 in CenturyLink shares. This implies a premium of of 11% over yesterdays closing price of Savvis stock. The $2.5 Billion price values Savvis at only 10 times 2011 earnings. Some analysts said today that this is a low offer, saying they would expect a fair price of $45 per share. As with many deals these days, they expect shareholder lawsuits due to the low offer.
Savvis Inc shares were trading up around 9% this morning, while CenturyLink shares were down only slightly by half a percent.