SAVVIS Top Bidder for C&W Assets

SAVVIS Communications has outbid six other suitors in a bankruptcy auction for the American web hosting operation of Cable & Wireless. The winning bid by SAVVIS, a managed services provider focused on the financial industry was said to exceed $155 million, topping an exisiting $125 million deal with Gores Technology Group.

Cable & Wireless' money-losing hosting operation remains among the largest in the world, with more than 767K hostnames and 250K active sites. Its 1,000-plus hosting customers include General Electric, Starbucks, Reebok, Office Max, CBS Sportsline and Slashdot.

C&W acquired the U.S. hosting operations of Digital Island and Exodus Communications in separate deals in 2001. Byt November 2002 C&W was already closing half the data centers it bought from Exodus, and in June of last year said it would exit the US hosting market. The company's US unit, Cable & Wireless America (CWA), filed for Chapter 11 protection Dec. 8 as part of an agreement to sell the hosting unit to Gores.

Bankruptcy rules require competitive bidding for high-value assets. The auction bidders included SAVVIS, Gores and investment entities formed by Cerberus Capital Management, DuPont Fabros, Leucadia National, Platinum Equity, and One Equity Partners. XO Communications said last week that it had submitted a bid for the C&W assets. But a court filing by Gores indicated that XO did not submit a bid itself, but was listed as a "permitted assignee" by several bidders, a designation that would allow assets to be transferred between the parties. It wasn't immediately clear whether the winning bid by SAVVIS included any assignment options.

Gores won't walk away empty-handed, as it will receive $4 million in fees for its efforts.