Cable & Wireless awaits decision on Savvis bid

U.K. network operator Cable and Wireless PLC (C&W) will hear Friday whether it can sell its loss-making U.S. Web hosting and IP (Internet Protocol) services business to Savvis Communications Corp. rather than to private investment company Gores Technology Group LLC.

As part of a court-supervised sale of Cable and Wireless America Inc. (CWA), Savvis offered to acquire almost all of the CWA assets for US$155 million in cash and to assume liabilities of approximately $12.4 million, the companies said.

C&W accepted the bid, but this now requires court approval at a hearing scheduled for Friday, 10 a.m. Mountain Standard Time, at the U.S. Bankruptcy Court in Phoenix.

Last December, C&W announced it placed CWA into Chapter 11 bankruptcy and intended to sell the majority of the company to Gores Technology, in Los Angeles, for US$125 million. At the time, C&W said it had entered into Chapter 11 as way to facilitate a sale transaction to Gores Technology.

As part of the bankruptcy process, however, qualifying bidders were given an opportunity to submit higher and better offers for CWA's evaluation in a court-supervised two day auction held Wednesday and Thursday. Savvis, with dual headquarters in St. Louis and Herndon, Virginia, was one of seven bidders for the CWA assets.

"This is not really a change in plan," said C&W spokesman Peter Eustace in London, "but rather the normal process taking its course."

Should the court grant its approval for the Savvis offer, the companies expect the sale transaction to close in February. Eustace declined to speculate on what would happen should the court reject the deal.

Representatives from CWA, Savvis and Gore Technology Group could not immediately be reached for comment.

Savvis said it would be gaining CWA's Tier 1 IP network, serving more than 2,000 enterprise customers, and its comprehensive hosting services, with more than 1,000 enterprise customers, 15 data centers and a complete range of managed hosting, consulting and infrastructure services.

As part of the complicated offer, Savvis said it has entered into a letter of intent with Du Pont Fabros Interests LLC whereby Savvis will sell its rights to acquire five of the CWA data centers to DuPont for $52 million, and then lease back those data centers for 15 years.

Savvis said the deal would double its size, adding over 5,000 customers and giving the combined company projected annualized revenues of approximately $700 million by the end of this year.

C&W began its retreat from the U.S. market in September 2002 when it sold its U.S. retail voice and data business to Primus Telecommunications Group Inc. The following June C&W claimed it was fully exiting the U.S. market as the company was losing around $1 million per day.

CWA said it will continue normal operations pending completion of the proposed sale, asserting that the company "remains focused on its core competencies of hosting and IP services while delivering uninterrupted service to its customers." But earlier this month, CWA reduced its customer base by about 400 in 11 cities. Those customers dropped from the service complained that they were notified by mail in December that they had 60 days to find another service provider or be cut off by Feb. 13.

Eustace declined to comment on CWA's decision to turn off nodes and drop customers, saying it was a matter for CWA to discuss.

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