C&W splashes $850m on Exodus

The acquisition will include 26 of Exodus' 44 operational data centres, as well as four others, of which 26 are in the US, two are in London, one in Tokyo and one in Frankfurt. The data centres, which represent around 4m square feet of space, will be combined with Cable & Wireless' existing operations and used to continue service to Exodus' existing customers in the US, Japan and Europe.

The deal also includes selected corporate and data centre assets, Exodus' employee base, intellectual property, brand and other supporting resources.

Cable & Wireless said that its plans for Exodus include an additional net investment of $250m, which will be required to take the business to cash flow break-even. According to Cable & Wireless projections, the business is expected to become EBITDA positive during 2003 and to contribute positively to earnings per share in the financial year ending 31 March 2005.

Cable & Wireless said the combination would position it for strong growth in the hosting and web services markets, and that it could make significant “revenues and cost-saving synergies” with the operations of Digital Island, which the company acquired recently for $340 million.

Cable & Wireless also claimed that the deal would generate “substantial new volumes of traffic” for its network, particularly in the US, as well as opportunities to sell its existing content delivery and infrastructure services to Exodus' existing customers.

However, as Exodus is currently subject to "Chapter 11" bankruptcy proceedings, Cable & Wireless must wait for a court-supervised auction at which other qualified bidders will be eligible to bid for Exodus' assets, before the transaction can go through.

Cable & Wireless said that it anticipates that the auction process should be completed by the end of January 2002, and assuming that the contract is granted final approval, the transaction should complete during February next year.

Exodus announced last month that it was liquidating four non-operational European hosting facilities in an effort to restructure after filing for Chapter 11 protection in the US on 26 September, citing over-investment in non-operational and under-utilised facilities in certain markets.

The company, which hosts 46 of the top 150 visited websites and serves approximately 3,500 customers, also received a commitment of up to $200m in debtor-in-possession financing from GR Capital to fund operating expenses and supplier and employee obligations.

Cable & Wireless chief executive Graham Wallace said in a statement: “We are being selective about which of Exodus' assets we are aiming to acquire - something the Chapter 11 procedure facilitates.”