Savvis Communications Corp. (Nasdaq: SVVS) is selling off its content delivery network to merger-happy Level 3 Communications Inc. (Nasdaq: LVLT), building up funds for what promises to be a continued surge in managed IT services.
Taking no time off for a holiday hangover, the companies announced today that Level 3 will acquire Savvis's CDN business for $135 million in cash, a deal expected to close by the end of March. (See Savvis to Sell CDN.)
Savvis will pour the cash into the $200 million construction of four U.S. data centers, in the Atlanta, New York, San Jose, and Washington, D.C. areas, with opening dates about a year from now. (See Savvis Opening Data Centers.)
Savvis stock was up 91 cents (2.5%) at $36.83 by early afternoon, while Level 3 shares had dropped 10 cents (1.8%) to $5.56.
The move has been expected of Savvis for a while. Since the spring, the company had talked of "strategic options" for the CDN business, and by November, word was circulating that the company had received multiple offers. One estimate at the time said the CDN business could go for $120 million. (See Will Savvis Sell Its CDN?.)