As filed with the Securities and Exchange Commission on May 17, 2011

Registration No. 333-      

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

CENTURYLINK, INC.

(Exact name of registrant as specified in its charter)

 

 

 

100 CenturyLink Drive
Monroe, Louisiana 71203
(318) 388-9000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Stacey W. Goff, Esq.
Executive Vice President, General Counsel and Secretary
CenturyLink, Inc.
100 CenturyLink Drive
Monroe, Louisiana 71203
(318) 388-9000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

 

Approximate date of commencement of the proposed sale of the securities to the public:   As soon as practicable after this registration statement becomes effective and upon completion of the merger described in the enclosed document.

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

 

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) o

 

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) o

 

CALCULATION OF REGISTRATION FEE

 

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

PRELIMINARY — SUBJECT TO COMPLETION — DATED MAY 17, 2011

 

 

MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT

 

Dear SAVVIS Stockholders:

 

The board of directors of SAVVIS, Inc., which we refer to as Savvis, has agreed to be acquired by CenturyLink, Inc., which we refer to as CenturyLink, under the terms of the Agreement and Plan of Merger, dated as of April 26, 2011, which we refer to as the merger agreement. Upon completion of the merger of a wholly owned subsidiary of CenturyLink with and into Savvis, CenturyLink will acquire Savvis, and Savvis will become a wholly owned subsidiary of CenturyLink. We refer to this transaction as the merger.

 

If the merger is completed, Savvis stockholders will have the right to receive, for each share of Savvis common stock held at the effective time of the merger (other than shares held by stockholders who properly exercise dissenters’ rights), (a) $30.00 in cash and (b) a fraction of a share of CenturyLink common stock (which we refer to as the stock consideration) equal to (x) $10.00 divided by (y) the volume-weighted average trading price of CenturyLink common stock over the 30 trading day period ending three trading days prior to the closing (which we refer to as the CenturyLink 30-day average price), except that if the CenturyLink 30-day average price is less than or equal to $34.42, each such Savvis share will be converted into the right to receive $30.00 in cash and 0.2905 of a CenturyLink share. The exchange ratio mechanism effectively provides for the stock consideration to have a fixed value (based on the CenturyLink 30-day average price) of $10.00 per share of Savvis common stock so long as the CenturyLink 30-day average price is at least $34.42. Cash will be paid in lieu of any fractional shares. CenturyLink common stock is traded on the New York Stock Exchange under the symbol “CTL.” Savvis common stock is traded on the NASDAQ Global Select Market under the symbol “SVVS.”

 

We cannot complete the merger unless the Savvis stockholders approve the adoption of the merger agreement, which approval we are seeking at the special meeting of stockholders of Savvis to be held on [ • ]. Your vote is very important, regardless of the number of shares you own. Whether or not you expect to attend the Savvis special meeting in person, please vote your shares as promptly as possible by (1) accessing the Internet website specified on your proxy card, (2) calling the toll-free number specified on your proxy card or (3) signing and returning all proxy cards that you receive in the postage-paid envelope provided, so that your shares may be represented and voted at the Savvis special meeting. A failure to vote your shares is the equivalent of a vote against the merger.

 

The Savvis board of directors unanimously recommends that the Savvis stockholders vote “FOR” the proposal to adopt the merger agreement and “FOR” the named executive officer merger-related compensation proposal described in this document.

 

The obligations of CenturyLink and Savvis to complete the merger are subject to the satisfaction or waiver of several conditions set forth in the merger agreement. More information about CenturyLink, Savvis and the merger is contained in this proxy statement/prospectus. We encourage you to read this entire proxy statement/prospectus carefully, including the section entitled “Risk Factors” beginning on page 12.

 

We look forward to the successful acquisition of Savvis by CenturyLink.

 

Sincerely,

 

James E. Ousley

Chairman and Chief Executive Officer

SAVVIS, Inc.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this proxy statement/prospectus or determined that this proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

 

This proxy statement/prospectus is dated [ • ], 2011, and is first being mailed to Savvis stockholders on or about [ • ], 2011.

SAVVIS, INC.

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [ • ], 2011

 

To the Stockholders of SAVVIS, Inc.:

 

We are pleased to invite you to attend a special meeting of stockholders of SAVVIS, Inc., a Delaware corporation, which we refer to as Savvis. The meeting will be held at [  :  A.M.], local time, on [ • ], 2011 at 1 Savvis Parkway, Town & Country, Missouri 63017 in order:

 

 

 

Only stockholders of record at the close of business on [ • ], 2011 are entitled to notice of, and may vote at, the special meeting and at any adjournment of the special meeting. A complete list of stockholders of record of Savvis entitled to vote at the Savvis special meeting will be available for the 10 days before the Savvis special meeting at Savvis’ executive offices and principal place of business at 1 Savvis Parkway, Town & Country, Missouri 63017 for inspection by stockholders of Savvis during ordinary business hours for any purpose germane to the Savvis special meeting. The list will also be available at the Savvis special meeting for examination by any stockholder of Savvis of record present at the special meeting.

 

In connection with Savvis’ solicitation of proxies for the special meeting, we began mailing the accompanying proxy statement/prospectus and proxy card on or about, [ • ], 2011. Whether or not you expect to attend the Savvis special meeting in person, please vote your shares as promptly as possible by (1) accessing the Internet website specified on your proxy card, (2) calling the toll-free number specified on your proxy card or (3) signing and returning all proxy cards that you receive in the postage-paid envelope provided, so that your shares may be represented and voted at the Savvis special meeting.

 

Adoption of the merger agreement requires the affirmative vote of holders of a majority of the outstanding shares of common stock entitled to vote on the proposal.

 

Your vote is very important. Please vote using one of the methods above to ensure that your vote will be counted. Your proxy may be revoked at any time before the vote at the special meeting by following the procedures outlined in the accompanying proxy statement/prospectus.

 

By Order of the Board of Directors,

 

Peter J. Bazil

Vice President, General Counsel and Secretary

SAVVIS, Inc.

Town & Country, Missouri

[ • ], 2011

 

TABLE OF CONTENTS

 

ADDITIONAL INFORMATION

 

This proxy statement/prospectus incorporates important business and financial information about CenturyLink and Savvis from other documents that are not included in or delivered with this proxy statement/prospectus. This information is available to you without charge upon your request. You may obtain the documents incorporated by reference into this proxy statement/prospectus by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:

 

 

The firm assisting Savvis with the solicitation of proxies:

 

Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
Stockholders call toll-free: (888) 750-5834
Banks and brokers call collect: (212) 750-5833

 

Investors may also consult Savvis’ website for more information concerning the merger described in this proxy statement/prospectus. Savvis’ website is www.savvis.com. Information included on this website is not incorporated by reference into this proxy statement/prospectus.

 

If you would like to request documents, please do so by [ • ], 2011 in order to receive them before the special meeting.

 

For more information, see “Where You Can Find More Information” beginning on page 91.

 

ABOUT THIS DOCUMENT

 

This document, which forms part of a registration statement on Form S-4 filed with the Securities and Exchange Commission, which we refer to as the SEC, by CenturyLink (File No. 333-[ • ]), constitutes a prospectus of CenturyLink under Section 5 of the Securities Act of 1933, as amended, which we refer to as the Securities Act, with respect to the CenturyLink common shares to be issued to Savvis stockholders as required by the merger agreement. This document also constitutes a proxy statement of Savvis under Section 14(a) of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, with respect to the special meeting of Savvis stockholders, at which Savvis stockholders will be asked to vote upon a proposal to adopt the merger agreement.

 

You should rely only on the information contained or incorporated by reference into this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus. This proxy statement/prospectus is dated [ • ], 2011. You should not assume that the information contained in, or incorporated by reference into, this proxy statement/prospectus is accurate as of any date other than the date on the front cover of those documents. Neither the mailing of this proxy statement/prospectus to Savvis stockholders nor the issuance by CenturyLink of common stock in connection with the merger will create any implication to the contrary.

 

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this proxy statement/prospectus regarding CenturyLink has been provided by CenturyLink and information contained in this proxy statement/prospectus regarding Savvis has been provided by Savvis.

 

The following are answers to some questions that you, as a stockholder of Savvis, may have regarding the merger and the other matters being considered at the stockholder meeting of Savvis (which we refer to as the special meeting or the Savvis special meeting). Savvis urges you to read carefully the remainder of this proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the merger and the other matters being considered at the special meeting. Additional important information is also contained in the annexes to and the documents incorporated by reference into this proxy statement/prospectus.

 

 

 

 

Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
Stockholders Call Toll-Free: (888) 750-5834
Banks And Brokers Call Collect: (212) 750-5833

 

SUMMARY

 

The Companies

 

The Merger and the Merger Agreement

	•	The merger agreement provides that a portion of outstanding restricted stock units, all outstanding stock options and all outstanding shares of restricted stock, including those held by executive officers of Savvis, vest in connection with the completion of the merger.
	•	Each executive officer of Savvis is party to an employment arrangement with Savvis that provides for severance and other benefits following a change in control of Savvis, such as the merger, and a qualifying termination of the executive officer’s employment.
	•	Savvis directors and officers are entitled to continued indemnification and insurance coverage pursuant to the merger agreement.

	•	the merger is not consummated by January 31, 2012, subject to one or more extensions, up to three months in the aggregate and possible further extensions, under certain circumstances;
	•	a court or other governmental entity issues a final and nonappealable order prohibiting the merger or having certain material effects on one or more parties to the merger agreement;
	•	Savvis stockholders fail to adopt the merger agreement; or
	•	the other party breaches the merger agreement in a way that would entitle the party seeking to terminate the agreement not to consummate the merger, subject to the right of the breaching party to cure the breach.

 

The Savvis Special Meeting (See page 28)

	•	to adopt the Agreement and Plan of Merger, dated as of April 26, 2011, among CenturyLink, Mimi Acquisition Company, a wholly owned subsidiary of CenturyLink, and Savvis, pursuant to which Mimi Acquisition Company will be merged with and into Savvis and each outstanding share of common stock of Savvis will be converted into the right to receive $30.00 in cash, and a fraction of a share of CenturyLink common stock equal to (x) $10.00 divided by (y) the CenturyLink 30-day average price, except if the CenturyLink 30-day average price is less than or equal to $34.42, each such Savvis share will instead be converted into the right to receive $30.00 in cash and 0.2905 of a CenturyLink share, in each case with cash paid in lieu of fractional shares;
	•	to approve an adjournment of the Savvis special meeting, if necessary or appropriate, in the view of the Savvis board of directors, to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are not sufficient votes at the time of such adjournment to adopt the merger agreement; and
	•	to approve, on a (non-binding) advisory basis, the compensation to be paid to Savvis’ named executive officers that is based on or otherwise relates to the merger, discussed under the section entitled “The Merger — Financial Interests of Savvis’ Directors and Executive Officers in the Merger — Potential Payments upon a Termination In Connection with a Change in Control” beginning on page 58.

 

Voting Agreement (See page 73)

 

Description of Debt Financing (See page 74)

 

Risk Factors (See page 12)

 

Selected Historical Financial Data of CenturyLink

		Three Months
		Ended March 31,								Years Ended December 31,
		2011				2010				2010				2009(1)				2008				2007				2006
		(Unaudited)
		(In millions, except per-share amounts)
Selected Statement of Operations Data
Operating revenues		$	1,696			$	1,800			$	7,042			$	4,974			$	2,600			$	2,656			$	2,448
Operating income		$	464			$	545			$	2,060			$	1,233			$	721			$	793			$	666
Net income attributable to CenturyLink, Inc.		$	211			$	253			$	948			$	647			$	366			$	418			$	370
Earnings per common share
Basic		$	0.69			$	0.84			$	3.13			$	3.23			$	3.53			$	3.79			$	3.15
Diluted		$	0.69			$	0.84			$	3.13			$	3.23			$	3.52			$	3.71			$	3.07	(2)
Dividends per common share		$	0.725			$	0.725			$	2.90			$	2.80			$	2.1675			$	0.26			$	0.25
Weighted average basic shares outstanding			303.8				299.4				300.6				198.8				102.3				109.4				116.7
Weighted average diluted shares outstanding			304.5				300.0				301.3				199.1				102.6				112.8				122.0	(2)

		March 31								December 31,
		2011				2010				2010				2009(1)				2008				2007				2006
		(Unaudited)
		(Dollars in millions)
Selected Balance Sheet Data
Net property, plant and equipment		$	8,649			$	8,970			$	8,754			$	9,097			$	2,896			$	3,108			$	3,109
Goodwill		$	10,261			$	10,252			$	10,261			$	10,252			$	4,016			$	4,011			$	3,431
Total assets		$	21,901			$	22,322			$	22,038			$	22,563			$	8,254			$	8,185			$	7,441
Long-term debt, including current portion		$	7,180			$	7,721			$	7,328			$	7,754			$	3,315			$	3,014			$	2,591
Shareholders’ equity		$	9,659			$	9,501			$	9,647			$	9,467			$	3,168			$	3,416			$	3,199
Selected Operating Data (unaudited)
Telephone access lines			6,397,000				6,913,000				6,504,000				7,039,000				2,025,000				2,135,000				2,094,000
High-speed Internet customers			2,446,000				2,306,000				2,394,000				2,236,000				641,000				555,000				369,000

(1)		On July 1, 2009, CenturyLink acquired Embarq Corporation, which we refer to as Embarq, in a stock-for-stock transaction which significantly expanded the scope of CenturyLink’s operations and the amount of its outstanding common stock and debt. Embarq’s financial results and balance sheet and operating data are included in the above table for periods or dates subsequent to the July 1, 2009 acquisition date.
(2)		These numbers reflect the retrospective application of Emerging Issues Task Force 03-06-1, which CenturyLink adopted January 1, 2009; therefore, these numbers are unaudited.

 

Selected Historical Financial Data of Savvis

		Three Months
		Ended March 31,								Years Ended December 31,
		2011				2010				2010				2009				2008				2007(1)				2006
		(Unaudited)
		(In millions, except per-share amounts)
Selected Statement of Operations Data
Operating revenues		$	257			$	217			$	933			$	874			$	857			$	794			$	764
Operating income		$	17			$	5			$	24			$	40			$	27			$	338			$	25
Net income attributable to Savvis, Inc.		$	(2	)		$	(11	)		$	(54	)		$	(21	)		$	(22	)		$	243			$	(44	)
Earnings per common share
Basic		$	(0.03	)		$	(0.21	)		$	(0.98	)		$	(0.39	)		$	(0.41	)		$	4.61			$	(9.54	)
Diluted		$	(0.03	)		$	(0.21	)		$	(0.98	)		$	(0.39	)		$	(0.41	)		$	4.51			$	(9.54	)
Dividends per common share			—				—				—				—				—				—				—
Weighted average basic shares outstanding			56.9				54.5				55.3				53.8				53.3				52.7				32.2
Weighted average diluted shares outstanding			56.9				54.5				55.3				53.8				53.3				57.2				32.2

		March 31								December 31,
		2011				2010				2010				2009				2008				2007				2006
		(Unaudited)
														(Dollars in millions)
Selected Balance Sheet Data
Net property, plant and equipment(2)		$	848			$	792			$	844			$	784			$	737			$	617			$	284
Goodwill		$	78				—			$	76				—				—				—				—
Total assets		$	1,203			$	1,031			$	1,184			$	1,025			$	950			$	888			$	467
Long-term debt, including current portion(3)		$	535			$	381			$	536			$	383			$	367			$	287			$	269
Shareholders’ equity (deficit)		$	203			$	208			$	186			$	210			$	200			$	217			$	(138	)

(1)		The significant changes in 2007 reflect the impact of gains on sale of certain data center assets of $180.5 million in June 2007 and content delivery network assets of $125.2 million in January 2007 and the impact of the loss on debt extinguishment of $45.1 million in June 2007 related to Savvis’ subordinated notes.
(2)		The significant increase in 2007 is a result of $225.8 million spent for the development or expansion of ten data centers, which Savvis opened during 2007 and 2008. The significant increase in 2010 is a result of $49.9 million spent for the expansion of four data centers and the $23.7 million in assets acquired in Savvis’ June 2010 acquisition of Fusepoint, Inc.
(3)		The significant increase in 2008 is a result of $47.9 million of proceeds from borrowings on Savvis’ Lombard loan agreement and $13.2 million in accretion on Savvis’ convertible notes. The significant increase in 2010 is a result of an additional $110.0 million in borrowings to finance Savvis’ acquisition of Fusepoint, Inc., in addition to the $14.2 million net impact of a debt refinancing transaction.

 

Equivalent and Comparative Per Share Information

		CenturyLink								Savvis
						Pro Forma								Pro Forma
		Historical				Combined(1)				Historical				Equivalent
Basic earnings per common share before extraordinary items and discontinued operations
Three months ended March 31, 2011		$	0.69			$	0.61			$	(0.03	)		$	0.15
Year ended December 31, 2010		$	3.13			$	1.13			$	(0.98	)		$	0.28
Diluted earnings per common share before extraordinary items and discontinued operations
Three months ended March 31, 2011		$	0.69			$	0.60			$	(0.03	)		$	0.15
Year ended December 31, 2010		$	3.13			$	1.13			$	(0.98	)		$	0.28
Cash dividends declared per common share
Three months ended March 31, 2011		$	0.725			$	0.725				—			$	0.18
Year ended December 31, 2010		$	2.90			$	2.90				—			$	0.72
Book value per common share
As of March 31, 2011		$	31.57			$	36.67			$	3.54			$	9.06

(1)		The assumed exchange ratio used to calculate the CenturyLink pro forma combined financial information, 0.2469, was calculated by dividing $10.00 by $40.4966, the volume-weighted average trading price of CenturyLink common stock as reported by the NYSE over the 30 trading day period ended May 16, 2011. The actual exchange ratio at closing will be determined based on the CenturyLink 30-day average price, which is measured over a period ending three trading days prior to the closing.

 

In addition to the other information included and incorporated by reference into this proxy statement/prospectus, including the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page [ • ], you should carefully consider the following risks before deciding whether to vote for adoption of the merger agreement. In addition, you should read and consider the risks associated with each of the businesses of CenturyLink and Savvis because these risks will also affect the combined company. A description of these risks can be found in the Annual Reports on Form 10-K for the fiscal year ended December 31, 2010 for each of CenturyLink, Qwest and Savvis, as updated by any subsequent Quarterly Reports on Form 10-Q, all of which are filed with the SEC and incorporated by reference into this proxy statement/prospectus. You should also read and consider the other information in this proxy statement/prospectus and the other documents incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page [ • ].

 

Savvis stockholders could under certain circumstances receive stock consideration valued at less than $10.00 per share of Savvis common stock, and the value of the stock consideration (based on the CenturyLink 30-day average price) will not be greater than $10.00 per share of Savvis common stock even if the price per share of CenturyLink common stock increases between execution of the merger agreement and completion of the merger.

 

Upon completion of the merger, each share of Savvis common stock, other than shares held by holders who properly exercise dissenters’ rights, will be converted into the right to receive (i) $30.00 in cash and (ii) a fraction of a share of CenturyLink common stock equal to (x) $10.00 divided by (y) the volume-weighted average trading price of CenturyLink common stock over the 30 trading day period ending three trading days prior to the closing, which we refer to as the CenturyLink 30-day average price, except that if the CenturyLink 30-day average price is less than or equal to $34.42, each such Savvis share will be converted into the right to receive $30.00 in cash and 0.2905 of a CenturyLink share. The exchange ratio mechanism effectively provides for the stock consideration to have a fixed value (based on the CenturyLink 30-day average price) of $10.00 per share of Savvis common stock so long as the CenturyLink 30-day average price is at least $34.42. As a result of the exchange ratio mechanism, Savvis stockholders have some protection against declines in the price per share of CenturyLink common stock between execution of the merger agreement and completion of the merger, because a lower CenturyLink 30-day average price will (so long as it is not less than $34.42) result in a greater fraction of a share of CenturyLink common stock being issuable as stock consideration. However, if the CenturyLink 30-day average price is below $34.42, the exchange ratio will be fixed at 0.2905 under the merger agreement. In such event, the value of the stock consideration for each share of Savvis common stock held by non-dissenting Savvis stockholders, based on the CenturyLink 30-day average price, will be less than $10.00. In addition, the value of the stock consideration (based on the CenturyLink 30-day average price) will not be greater than $10.00 per share of Savvis common stock even if the price per share of CenturyLink common stock increases between execution of the merger agreement and completion of the merger, because a higher CenturyLink 30-day average price will result in a smaller fraction of a share of CenturyLink common stock being issuable as stock consideration. Moreover, the value of such stock consideration, based on the actual trading price per share of CenturyLink common stock at the time of closing, could be less (or more) than $10.00 due to potential variances between the CenturyLink 30-day average price and the actual trading price per share of CenturyLink common stock at closing.

 

The market price of CenturyLink common stock will likely be different, and may be lower, on the date Savvis stockholders receive their shares of CenturyLink common stock than the market price of CenturyLink common stock on the date the merger agreement was executed or the date of this proxy statement/prospectus. Differences in the market price of CenturyLink common stock may be the result of changes in the business, operations or prospects of CenturyLink, market reactions to the proposed merger and market assessments of its likelihood of being completed, regulatory considerations or developments, general market or economic conditions or other factors. As noted above, changes in the market price of CenturyLink common stock may cause the fraction of a share issuable as stock consideration to fluctuate.

Because the merger will be completed later than the time of the Savvis special meeting, Savvis stockholders will not know the exact fraction of a share of CenturyLink common stock that will be issued in the merger as stock consideration or its value, and the exact value of the CenturyLink common stock issued as stock consideration in the merger may be less than it would have been had the merger occurred on the date of the special meeting. Savvis and CenturyLink encourage you to obtain current market quotations for CenturyLink common stock before you vote your shares.

 

During the twelve-month period ending on [ • ], 2011, the record date for the special meeting of Savvis stockholders, the closing price of CenturyLink common stock varied from a low of $[ • ] to a high of $[ • ], and ended that period at $[ • ].

 

The completion of the merger is subject to the receipt of consents and approvals from government entities, which may impose conditions that could have an adverse effect on CenturyLink or Savvis or could cause either CenturyLink or Savvis to abandon the merger.

 

CenturyLink and Savvis are unable to complete the merger until after the applicable waiting period under the HSR Act expires or terminates and approvals are received from the FCC. In addition, CenturyLink and Savvis are required to provide notification of the merger or supplemental information to the public utility commissions of two states in the United States and notification of the merger to certain regulatory bodies in various foreign countries where Savvis holds licenses. Regulatory entities may oppose the merger or impose certain requirements or obligations as conditions for their approval or in connection with their review. Regulatory approvals of the merger may not be obtained on a timely basis or at all, and such approvals may include conditions that could be detrimental or result in the abandonment of the merger.

 

The merger agreement may require CenturyLink to accept conditions from these regulators that could adversely impact CenturyLink after the merger without either of CenturyLink or Savvis having the right to refuse to close the merger on the basis of those regulatory conditions. Neither CenturyLink nor Savvis can provide any assurance that they will obtain the necessary approvals or that any required conditions will not have a material adverse effect on CenturyLink following the merger. In addition, CenturyLink and Savvis can provide no assurance that these conditions will not result in the abandonment of the merger. See “The Merger — Regulatory Approvals Required for the Merger” beginning on page [ • ] and “The Merger — The Merger Agreement — Conditions to Completion of the Merger” beginning on page [ • ].

 

Failure to complete the merger could negatively impact the stock price and the future business and financial results of Savvis.

 

The completion of the merger is subject to the satisfaction of a number of conditions in addition to the regulatory conditions described in the risk factor above, and may not occur, even if the approval of Savvis’ stockholders is received. For a discussion of the conditions to completion of the merger, see “The Merger — The Merger Agreement — Conditions to Completion of the Merger” beginning on page [ • ]. If the merger is not completed, the ongoing business of Savvis may be adversely affected and Savvis will be subject to several risks, including the following:

 

 

In addition to the above risks, Savvis may be required, under certain circumstances, to pay to CenturyLink a termination fee of $85 million which may materially adversely affect Savvis’ financial condition.

 

If the merger is not completed, Savvis cannot assure its stockholders that these risks will not materialize and will not materially affect its business, financial results and stock price.

The merger agreement contains provisions that could discourage a potential competing acquirer of Savvis or could result in any competing proposal being at a lower price than it might otherwise be.

 

The merger agreement contains “no shop” provisions that, subject to certain exceptions, restrict Savvis’ ability to solicit, encourage, facilitate or discuss competing third-party proposals to acquire all or a significant part of Savvis. Further, even if the Savvis board of directors withdraws or qualifies its recommendation in favor of adopting the merger agreement, Savvis will still be required to submit the matter to a vote of their stockholders at the Savvis special meeting. In addition, CenturyLink generally has an opportunity to offer to modify the terms of the proposed merger in response to any competing acquisition proposal that may be made before the Savvis board of directors may withdraw or qualify its recommendation. In some circumstances upon termination of the merger agreement, Savvis may be required to pay to CenturyLink a termination fee of $85 million. See “The Merger — The Merger Agreement — No Solicitation of Alternative Proposals” beginning on page [ • ], “— Termination of the Merger Agreement” beginning on page [ • ] and “— Expenses and Termination Fees” beginning on page [ • ].

 

These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Savvis from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than that market value proposed to be received or realized in the merger, or might result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances.

 

The pendency of the merger could adversely affect the business and operations of CenturyLink and Savvis.

 

In connection with the pending merger, some customers or vendors of each of CenturyLink and Savvis may delay or defer decisions, which could negatively impact the revenues, earnings, cash flows and expenses of CenturyLink and Savvis, regardless of whether the merger is completed. Similarly, current and prospective employees of CenturyLink and Savvis may experience uncertainty about their future roles with CenturyLink following the merger, which may materially adversely affect the ability of each of CenturyLink and Savvis to attract, retain and motivate key personnel during the pendency of the merger and which may materially adversely divert attention from the daily activities of CenturyLink’s and Savvis’ existing employees. In addition, due to operating covenants in the merger agreement, Savvis may be unable, during the pendency of the merger, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions that are not in the ordinary course of business, even if such actions would prove beneficial.

 

Certain executive officers of Savvis may have interests in the merger that may differ from, or be in addition to, the interests of Savvis stockholders.

 

Executive officers of Savvis negotiated the terms of the merger agreement with their counterparts at CenturyLink, and the Savvis board of directors determined that entering into the merger agreement was in the best interests of Savvis and its stockholders, declared the merger agreement advisable and recommended that Savvis stockholders adopt the merger agreement. In considering these facts and the other information contained in this proxy statement/prospectus, you should be aware that Savvis’ executive officers and directors may have financial interests in the merger that may be different from, or in addition to, the interests of Savvis stockholders. For a detailed discussion of the interests that Savvis’ directors and executive officers may have in the merger, please see “The Merger — Financial Interests of Savvis’ Directors and Executive Officers of Savvis in the Merger.”

 

The market price of CenturyLink common stock after the merger may be affected by factors different from those currently affecting the shares of CenturyLink or Savvis.

 

Upon completion of the merger, holders of Savvis common stock will become holders of CenturyLink common stock. The business of CenturyLink differs from that of Savvis in important respects and,

accordingly, the results of operations of the combined company and the market price of shares of CenturyLink common stock following the merger may be affected by factors different from those currently affecting the independent operations of CenturyLink and Savvis. For a discussion of the businesses of CenturyLink and Savvis and of certain factors to consider in connection with those businesses, see the documents incorporated by reference into this proxy statement/prospectus referred to under “Where You Can Find Additional Information” beginning on page [ • ] of this proxy statement/prospectus.

 

Savvis stockholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

 

Savvis stockholders currently have the right to vote in the election of directors of Savvis and on certain other matters affecting Savvis. Following the merger, each Savvis stockholder will become a shareholder of CenturyLink with a percentage ownership of the combined company that is much smaller than the stockholder’s percentage ownership of Savvis. It is expected that the former stockholders of Savvis as a group will own less than 4.0% of the outstanding shares of CenturyLink immediately after the completion of the merger. Because of this, Savvis’ stockholders will have substantially less influence on the management and policies of CenturyLink than they now have with respect to the management and policies of Savvis.

 

Several lawsuits have been filed against Savvis, the members of the Savvis board of directors, CenturyLink and Mimi Acquisition Company, and an adverse judgment in such lawsuits may prevent the merger from becoming effective or from becoming effective within the expected timeframe.

 

Savvis, the members of the Savvis board of directors, CenturyLink and Mimi Acquisition Company are named as defendants in purported class action lawsuits brought by Savvis stockholders challenging the proposed merger, seeking, among other things, to enjoin defendants from completing the merger on the agreed-upon terms. If the plaintiffs are successful in obtaining an injunction prohibiting the parties from completing the merger on the agreed-upon terms, the injunction may prevent the completion of the merger in the expected timeframe (or altogether).

 

Operational Risks

 

CenturyLink expects to incur substantial expenses related to the merger.

 

CenturyLink expects to incur relatively significant expenses in connection with completing the merger and integrating many of the operations, networks, systems, technologies, policies and procedures of Savvis with those of CenturyLink. There are a large number of systems that must be integrated, including accounting, finance, payroll, benefits and other human resource functions. The decision to integrate other systems, such as quoting, ordering, provisioning and billing systems, will be evaluated by CenturyLink over time. While CenturyLink has assumed that a certain level of transaction and integration expenses would be incurred, there are a number of factors beyond its control that could affect the total amount or the timing of its integration expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Moreover, CenturyLink expects to commence these integration initiatives before it has completed a comprehensive integration of its business with the businesses of Embarq and Qwest, acquired in 2009 and 2011, respectively, which could cause each of these integration initiatives to be delayed or rendered more costly or disruptive than would otherwise be the case. Due to these factors, the transaction and integration expenses associated with the Savvis merger could, particularly in the near term, exceed the savings that CenturyLink expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the integration of the businesses following the completion of the merger. As a result of these expenses, CenturyLink expects to take charges against its earnings before and after the completion of the merger. The charges taken after the merger are expected to be substantial, although the aggregate amount and timing of such charges are uncertain at present.

Following the merger, CenturyLink may be unable to successfully integrate Savvis’ business and realize the anticipated benefits of the merger.

 

CenturyLink and Savvis currently operate as independent public companies. After the merger, CenturyLink will be required to devote significant management attention and resources to integrating the business practices and operations of Savvis. Potential difficulties CenturyLink may encounter in the integration process include the following:

 

 

For all these reasons, you should be aware that it is possible that the integration process following the merger could result in the distraction of CenturyLink’s management, the disruption of CenturyLink’s ongoing business or inconsistencies in its products, services, standards, controls, procedures and policies, any of which could adversely affect the ability of CenturyLink to maintain relationships with customers, vendors and employees or to achieve the anticipated benefits of the merger, or could otherwise adversely affect the business and financial results of CenturyLink.

 

As a result of the merger, CenturyLink may be unable to retain key employees.

 

The success of CenturyLink after the merger will depend in part upon its ability to retain key CenturyLink and Savvis employees. Key employees may depart because of a variety of reasons relating to the merger. If CenturyLink and Savvis are unable to retain personnel, including Savvis’ key management, technical and sales personnel, who are critical to the successful integration and future operations of the combined company, CenturyLink could face disruptions in its operations, loss of existing customers, loss of key information, expertise or know-how, and unanticipated additional recruitment and training costs. In addition, the loss of key personnel could diminish the anticipated benefits of the merger.

 

If CenturyLink continues to experience access line losses similar to the past several years, CenturyLink’s revenues, earnings and cash flows may be adversely impacted.

 

CenturyLink’s business generates a substantial portion of its revenues by delivering voice and data services over access lines. CenturyLink has experienced substantial access line losses over the past several years due to a number of factors, including increased competition and wireless and broadband substitution. CenturyLink expects to continue to experience access line losses following the merger. CenturyLink’s inability to retain access lines could adversely impact its revenues, earnings and cash flow from operations.

CenturyLink and Savvis face competition, which is expected to intensify and which may reduce the market share and profits of CenturyLink after the merger.

 

As a result of various technological, regulatory and other changes, the communications industry has become increasingly competitive. CenturyLink faces competition from (i) wireless telephone services, which is expected to increase as wireless providers continue to expand and improve their network coverage and offer enhanced services, (ii) cable television operators, (iii) competitive local exchange carriers, (iv) providers of Voice over Internet Protocol, which we refer to as VoIP, or broadband services, (v) alternative networks or non-carrier systems designed to reduce demand for CenturyLink’s switching or access services and (vi) resellers, sales agents and facilities-based providers that either use their own networks or lease parts of CenturyLink’s networks. Over time, CenturyLink expects to face additional local exchange competition from electric utilities, satellite communications providers and municipalities. The recent proliferation of companies offering integrated service offerings has intensified competition in Internet, long distance and data services markets, and CenturyLink expects that competition will further intensify in these markets. The markets for Savvis’ hosting, network and professional services are also extremely competitive.

 

Some of the current and potential competitors of CenturyLink and Savvis (i) offer a more comprehensive range of communications products and services, (ii) have substantially greater market presence, engineering and technical capabilities, and financial and other resources, (iii) own larger and more diverse networks, (iv) conduct operations or raise capital at a lower cost, (v) are subject to less regulation, (vi) offer greater online content services or (vii) have substantially stronger brand names. Consequently, these competitors may be better equipped to charge lower prices for their products and services, to provide more attractive offerings, to develop and expand their communications and network infrastructures more quickly, to adapt more swiftly to new or emerging technologies and changes in customer requirements, and to devote greater resources to the marketing and sale of their products and services.

 

Following the merger, CenturyLink’s competitive position could be weakened by strategic alliances or consolidation within the communications industry or the development of new technologies. CenturyLink’s ability to compete successfully will depend on how well it markets its products and services and on its ability to anticipate and respond to various competitive and technological factors affecting the industry, including changes in regulation (which may affect CenturyLink differently from its competitors), changes in consumer preferences or demographics, and changes in the product offerings or pricing strategies of CenturyLink’s competitors.

 

After the merger, competition could adversely impact CenturyLink in several ways, including (i) the loss of customers and market share, (ii) the possibility of customers reducing their usage of CenturyLink’s services or shifting to less profitable services, (iii) reduced traffic on CenturyLink’s networks, (iv) CenturyLink’s need to expend substantial time or money on new capital improvement projects, (v) CenturyLink’s need to lower prices or increase marketing expenses to remain competitive and (vi) CenturyLink’s inability to diversify by successfully offering new products or services.

 

CenturyLink could be harmed by rapid changes in technology.

 

The communications industry is experiencing significant technological changes, particularly in the areas of VoIP, data and video transmission and electronic and wireless communications, and these changes are expected to continue after the merger. The growing prevalence of electronic mail and other non-voice communications continues to reduce demand for many of CenturyLink’s incumbent products and services. Similarly, CenturyLink’s successful integration of Savvis depends on its ability to operate successfully in an industry characterized by rapid technological change and frequent introduction of new products and services. Other changes in technology could result in the development of additional products or services that compete with or displace those to be offered by CenturyLink after the merger, or that enable current customers to reduce or bypass use of CenturyLink’s networks, infrastructure or services. Some of CenturyLink’s competitors may enjoy infrastructure advantages that will enable them to provide services that have a greater market acceptance than those of CenturyLink. Technological change could also require CenturyLink to expend capital or other resources in excess of currently contemplated levels, or to forego the development or provision of products or services that others can provide more efficiently. CenturyLink cannot predict with certainty

which technological changes will provide the greatest threat to its competitive position. CenturyLink may not be able to obtain timely access to new technology on satisfactory terms or incorporate new technology into its systems in a cost effective manner, or at all. If CenturyLink cannot develop new products to keep pace with technological advances, or if such products are not widely embraced by its customers, CenturyLink could be adversely impacted.

 

CenturyLink cannot assure you that its diversification efforts will be successful.

 

The telephone industry has recently experienced a decline in access lines and intrastate minutes of use, which, coupled with the other changes resulting from competitive, technological and regulatory developments, could materially adversely affect CenturyLink’s incumbent business and future prospects. As explained in greater detail elsewhere in the reports that CenturyLink has filed with the SEC, CenturyLink’s access lines (excluding the effect of acquisitions) have decreased in number over the last several years, and CenturyLink expects this trend to continue. CenturyLink has also earned less network access revenues in recent years due to reductions in access rates and minutes of use (partially due to the displacement of minutes of use by wireless, electronic mail, text messaging, arbitrage and other optional calling services). CenturyLink believes that its access rates and minutes of use will continue to decline, although the magnitude of such decrease is uncertain.

 

Prior to entering into the merger agreement with Savvis, CenturyLink broadened the scope of its service bundles by offering satellite television provided by DIRECTV and wireless voice services provided by Verizon Wireless. CenturyLink’s reliance on other companies and their networks to provide these services could constrain its flexibility and limit the profitability of these new offerings. CenturyLink also provides facilities-based digital video services to select markets, and, through its Qwest subsidiary, offers many of the same services currently offered by Savvis. Following the merger, CenturyLink may initiate other new service or product offerings. CenturyLink anticipates that most of these new offerings will generate lower profit margins than many of its traditional services. Moreover, CenturyLink’s new product or service offerings could be constrained by intellectual property rights held by others, or could subject CenturyLink to the risk of infringement claims brought against it by others. For these and other reasons, CenturyLink cannot assure you that its recent or future diversification efforts will be successful.

 

CenturyLink may not be able to continue to grow through acquisitions.

 

In the past, CenturyLink has sought growth largely through acquisitions of properties similar to those currently operated by it, such as those acquired through the acquisitions of Embarq in 2009 and Qwest in 2011. In the future, CenturyLink may pursue growth opportunities through acquisitions of properties that are not directly similar to those currently operated by it, much like the proposed merger with Savvis. However, following the merger, CenturyLink cannot assure you that properties will be available for purchase on terms attractive to it. Moreover, CenturyLink cannot assure you that it will be able to arrange financing on terms acceptable to it or to obtain timely federal and state governmental approvals on terms acceptable to it, or at all.

 

CenturyLink’s future results will suffer if it does not effectively manage its expanded operations following the merger.

 

CenturyLink’s acquisitions of Embarq and Qwest significantly changed the composition of its markets and product mix. Completion of the proposed merger with Savvis will further alter CenturyLink’s markets and product mix, and substantially expand its exposure to international operations. CenturyLink’s future success depends, in part, on its ability to retrain its staff to acquire or strengthen skills necessary to address these changes, and, where necessary, to attract and retain new personnel that possess these skills.

 

Following the merger, CenturyLink may continue to expand its operations through additional acquisitions, other strategic transactions, and new product and service offerings, some of which could involve complex technical, engineering, and operational challenges. CenturyLink’s future success depends, in part, upon its ability to manage its expansion opportunities, which pose substantial challenges for CenturyLink to integrate

new operations into its existing business in an efficient and timely manner, to successfully monitor its operations, costs, regulatory compliance and service quality, and to maintain other necessary internal controls. CenturyLink cannot assure you that its expansion or acquisition opportunities will be successful, or that it will realize its expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits.

 

Following the merger, CenturyLink’s relationships with other communications companies will continue to be material to its operations and will expose it to a number of risks.

 

Following the merger, CenturyLink will continue to originate and terminate calls for long distance carriers and other interexchange carriers over its networks in exchange for access charges that will continue to represent a significant portion of CenturyLink’s revenues. If these carriers go bankrupt or experience substantial financial difficulties, or are unable or otherwise unwilling to pay CenturyLink’s access charges, CenturyLink’s inability to timely collect access charges from them could have a negative effect on its business and results of operations.

 

In addition, certain of CenturyLink’s operations will continue to carry a significant amount of voice and data traffic for larger communications companies. As these larger communications companies consolidate or expand their networks, it is possible that they could transfer a significant portion of this traffic from CenturyLink’s fiber network to their networks, which could have a negative effect on CenturyLink’s business and results of operations.

 

Following completion of the merger, it is expected that CenturyLink will continue to rely on certain reseller, capacity and sales agency arrangements with other companies to provide some of the communications services that it will sell to its customers. If CenturyLink fails to extend or renegotiate these arrangements as they expire from time to time or if these other companies fail to fulfill their contractual obligations, CenturyLink may have difficulty finding alternative arrangements. In addition, as a reseller or sales agent, CenturyLink will not control the availability, retail price, design, function, quality, reliability, customer service or branding of these products and services, nor will it directly control all of the marketing and promotion of these products and services. To the extent that these other companies make decisions that negatively impact the ability of CenturyLink to market and sell its products and services, its business plans and reputation could be negatively impacted.

 

Following the merger, CenturyLink will rely on various other key suppliers, vendors, landlords and other third parties to operate its business.

 

Following the merger, CenturyLink will depend on a limited number of suppliers and vendors for equipment and services relating to its network and systems infrastructure. CenturyLink’s local exchange carrier networks consist of central office and remote sites, all with advanced digital switches. If any of these suppliers experience interruptions or other problems delivering or servicing these network components on a timely basis, CenturyLink’s operations could suffer significantly. To the extent that proprietary technology of a supplier is an integral component of CenturyLink’s infrastructure, CenturyLink may have limited flexibility to purchase key network components from alternative suppliers. Similarly, CenturyLink’s data center operations after the merger will be materially reliant on leasing space from landlords and power services from utility companies, and being able to renew these arrangements from time to time on favorable terms. CenturyLink also relies on a limited number of software vendors to support its systems. In the event it becomes necessary to seek alternative suppliers and vendors with respect to any of its current operations, CenturyLink may be unable to obtain satisfactory replacement supplies, services, space or utilities on economically attractive terms, on a timely basis, or at all, which could increase costs or cause disruptions in its services.

Network disruptions or system failures could adversely affect CenturyLink’s operating results and financial condition.

 

To be successful, CenturyLink will need to continue providing its customers with reliable and secure network and systems infrastructure. Some of the risks to CenturyLink’s networks and other infrastructure include:

 

 

Disruptions or system failures may cause interruptions in service or reduced capacity for customers. If service is not restored in a timely manner, agreements with CenturyLink’s customers or service standards set by state regulatory commissions could obligate CenturyLink to provide credits or other remedies, or permit customers to terminate their agreements with CenturyLink. If network security is breached, confidential information of CenturyLink’s customers or others could be lost or misappropriated, and CenturyLink may be required to expend additional resources modifying network security to remediate vulnerabilities. The occurrence of any disruption or system failure may result in a loss of business, increase expenses, damage CenturyLink’s reputation, subject CenturyLink to additional regulatory scrutiny or expose CenturyLink to litigation and possible financial losses, any of which could have a material adverse effect on its results of operations and financial condition.

 

Consummation of the merger will increase CenturyLink’s exposure to the risks of operating internationally.

 

Prior to acquiring Qwest on April 1, 2011, substantially all of CenturyLink’s operations were historically conducted within the continental United States. Although Qwest has historically conducted operations overseas, the acquisition of Savvis will increase the importance of international operations to CenturyLink’s future operations, growth and prospects.

 

In addition to the international regulatory risks noted immediately below under “— Regulatory and Legal Risks”, some of the risks inherent in conducting business internationally include:

 

 

Any one or more of these factors could adversely affect CenturyLink’s international operations.

 

Moreover, in order to effectively compete in certain foreign jurisdictions, it is frequently necessary or required to establish joint ventures, strategic alliances or marketing arrangements with local operators, partners or agents. Reliance on local operators, partners or agents could expose CenturyLink to the risk of being unable to control the scope or quality of its overseas services or products, or being held liable under the FCPA for

actions taken by its strategic or local partners or agents even though these partners or agents may not themselves be subject to the FCPA. Any determination that the combined company has violated the FCPA could have a material adverse effect on its business, results of operations, or prospects.

 

CenturyLink’s revenues could be materially reduced or its expenses materially increased by changes in regulations, including those recently proposed by the FCC.

 

The majority of CenturyLink’s revenues are substantially dependent upon regulations which, if changed, could result in material revenue reductions. Laws and regulations applicable to CenturyLink and its competitors have been and are likely to continue to be subject to changes and court challenges, which could also affect CenturyLink’s financial performance.

 

Risk of loss or reduction of network access charge revenues or support fund payments.  A significant portion of CenturyLink’s revenues is derived from switched or special access charge revenues that are paid to CenturyLink by other carriers based largely on rates set by federal and state regulatory bodies. Interexchange carriers have filed complaints in various forums requesting reductions in CenturyLink’s access rates. In addition, several long distance providers have begun disputing amounts owed to CenturyLink for carrying VoIP traffic, or refusing to pay such amounts. Several state public service commissions are investigating intrastate access rates and the ultimate outcome and impact of such investigations are uncertain.

 

The FCC regulates tariffs for interstate switched access, special access and subscriber line charges, all of which are components of CenturyLink’s revenue. The FCC has been considering comprehensive reform of its intercarrier compensation rules for several years, including proposals included in its recently-released National Broadband Plan that, as proposed, are likely to reduce network access payments. Any reform eventually adopted by the FCC will likely involve significant changes in the current access charge system and could potentially result in a significant decrease or elimination of access charges altogether. In addition, CenturyLink could be harmed if carriers that use its access services become financially distressed or bypass CenturyLink’s networks, either due to changes in regulation or other factors. Action or inaction by the FCC on intercarrier compensation could lead to disputes with other carriers that delay or prevent CenturyLink from collecting the full amount of its established access charges.

 

The FCC and Congress may take actions that would impact CenturyLink’s video programming access and pricing, which could adversely affect CenturyLink’s ability to continue to expand its video business and to strengthen its competitive position in its existing video markets.

 

CenturyLink receives revenues from the federal Universal Service Fund, or USF, and, to a lesser extent, intrastate support funds. These governmental programs are reviewed and amended from time to time, and CenturyLink cannot provide assurance that they will not be changed or impacted in a manner adverse to CenturyLink. Over the past few years, high cost support fund payments to CenturyLink’s operating subsidiaries have decreased due to increases in the nationwide average cost per loop factor used to determine payments to program participants, as well as declines in the overall size of the high cost support fund. In addition, the number of eligible telecommunications carriers receiving support payments from this program has increased substantially in recent years, which, coupled with other factors, has placed additional financial pressure on the amount of money that is available to provide support payments to all eligible recipients, including CenturyLink. For several years, the FCC and others have considered comprehensive reforms of the federal USF contribution and distribution rules. In April 2010, the FCC proposed to replace the USF with a broadband “Connect America” fund, the impact of which on CenturyLink is currently unclear.

 

The FCC’s National Broadband Plan released on March 16, 2010 seeks comprehensive changes in federal communications regulations and programs that could, among other things, reduce or eliminate USF and access revenues for CenturyLink’s local exchange companies. CenturyLink cannot predict the ultimate outcome of this plan or provide any assurances that its implementation will not have a material adverse effect on its business, operating results or financial condition.

Risks posed by state regulations.  CenturyLink is also subject to the authority of state regulatory commissions which have the power to regulate intrastate rates and services, including local, in-state long-distance and network access services. Under certain circumstances, CenturyLink’s incumbent local exchange carriers could be ordered to reduce rates or could experience rate reductions following the lapse of regulatory plans currently in effect. CenturyLink’s business could also be materially adversely affected by the adoption of new laws, policies and regulations or changes to existing state regulations. In particular, CenturyLink cannot assure you that it will succeed in obtaining or maintaining all requisite state regulatory approvals for its operations without the imposition of adverse conditions on its business that impose additional costs or limit its revenues.

 

Risks posed by international laws and regulations.  Following the merger, CenturyLink’s non-domestic operations will be subject to varying degrees of regulation in each of the jurisdictions in which it provides services. Local laws and regulations, and their interpretation and enforcement, differ significantly among those jurisdictions, and can change significantly over time. Future regulatory, judicial and legislative changes or interpretations may have a material adverse effect on CenturyLink’s ability to deliver services within various jurisdictions. Many of these foreign laws and regulations relating to communications services are more restrictive than U.S. laws and regulations, particularly those relating to content distributed over the Internet. For example, the European Union has enacted a data retention system that, once implemented by individual member states, will involve requirements to retain certain Internet protocol, or IP, data that could have an impact on CenturyLink’s operations in Europe. Moreover, national regulatory frameworks that are consistent with the policies and requirements of the World Trade Organization have only recently been, or are still being, enacted in many countries. Accordingly, many countries are still in the early stages of providing for and adapting to a liberalized telecommunications market. As a result, in these markets CenturyLink may encounter more protracted and difficult procedures to obtain licenses.

 

Risks posed by costs of regulatory compliance.  Regulations continue to create significant compliance costs for CenturyLink. Challenges to CenturyLink’s tariffs by regulators or third parties or delays in obtaining certifications and regulatory approvals could cause CenturyLink to incur substantial legal and administrative expenses, and, if successful, such challenges could adversely affect the rates that CenturyLink is able to charge its customers. CenturyLink’s business also may be impacted by legislation and regulation imposing new or greater obligations related to enhancing privacy, bolstering homeland security, increasing disaster recovery requirements, minimizing environmental impacts, or addressing other issues that impact CenturyLink’s business, including the Communications Assistance for Law Enforcement Act (which requires communications carriers to ensure that their equipment, facilities, and services are able to facilitate authorized electronic surveillance), and laws governing local number portability and customer proprietary network information requirements. CenturyLink expects its compliance costs to increase if future laws or regulations continue to increase its obligations to assist other governmental agencies.

 

Any adverse outcome of the KPNQwest litigation or other material litigation of CenturyLink or Savvis could have a material adverse impact on the financial condition and operating results of CenturyLink following the merger.

 

As described in further detail in CenturyLink’s reports filed with the SEC, the pending Dutch proceedings relating to the bankruptcy of KPNQwest, N.V., which we refer to as the KPNQwest litigation, presents material and significant risks to CenturyLink. In the aggregate, the plaintiffs in these matters have sought billions of dollars in damages.

 

There are other proceedings pending against CenturyLink and Savvis, the most significant of which are described in their respective reports filed with the SEC. Depending on their outcome, any of these matters could have a material adverse effect on the financial position or operating results of CenturyLink following the merger. Neither CenturyLink nor Savvis can give any assurances as to the impacts on their operating results or financial conditions as a result of these proceedings pending against them.

Counterparties to certain significant agreements with Savvis may exercise contractual rights to terminate such agreements following the merger.

 

Savvis is a party to certain agreements with landlords, vendors or customers that could potentially be construed to give the counterparty a right to terminate the agreement following a “change in control” of Savvis. In addition, certain Savvis customer contracts allow the customer to terminate the contract at any time for convenience or upon payment of a termination fee, which would allow the customer to terminate its contract before, at or after the closing of the merger. Any such counterparty may request modifications of their respective agreements as a condition to their agreement not to terminate. There is no assurance that such agreements will not be terminated, that any such terminations will not result in a material adverse effect, or that any modifications of such agreements to avoid termination will not result in a material adverse effect.

 

CenturyLink is planning to finance the cash portion of the merger consideration, to repay outstanding indebtedness of Savvis and to pay fees and expenses incurred in connection with the merger, in whole or in part, with funds obtained through senior unsecured term loans, and CenturyLink cannot guarantee that it will be able to obtain the necessary funds from the lenders on favorable terms or at all.

 

In connection with the merger, CenturyLink has entered into a commitment letter with Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Barclays Bank PLC, or the lenders. Pursuant to this commitment letter, the lenders have committed, under certain circumstances, to provide up to $2.0 billion through new senior unsecured term loans, or the bridge facility. Any borrowings under the bridge facility will be used to finance the cash portion of the merger consideration, to repay certain outstanding indebtedness of Savvis and to pay for fees and expenses incurred in connection with the merger, in whole or in part. The commitments of the lenders under the commitment letter are subject to certain conditions, including, among others, the absence of certain specified material adverse effects with respect to Savvis or CenturyLink and Savvis on a combined basis after giving effect to the merger, and CenturyLink cannot guarantee that such proceeds will be available on favorable terms or at all. The completion of the merger is not conditioned on the availability of the financing described above. See “Description of Debt Financing” on page [ • ].

 

CenturyLink’s business and financial alternatives could be constrained by its current debt, its additional debt to be incurred in connection with the merger, and any future borrowings.

 

As a result of additional borrowings in connection with the merger, CenturyLink will become more leveraged. This could have material adverse consequences for CenturyLink following the merger, including (i) reducing CenturyLink’s credit ratings and thereby raising its borrowing costs, (ii) hindering CenturyLink’s ability to adjust to changing market, industry or economic conditions, (iii) limiting CenturyLink’s ability to access the capital markets to refinance maturing debt or to fund acquisitions or emerging businesses, (iv) limiting the amount of free cash flow available for future operations, acquisitions, dividends, stock repurchases or other uses, (v) making CenturyLink more vulnerable to economic or industry downturns, including interest rate increases, and (vi) placing CenturyLink at a competitive disadvantage compared to less leveraged competitors.

 

In connection with executing CenturyLink’s business strategies following the merger, CenturyLink expects to continue to evaluate the possibility of acquiring additional communications assets and making strategic investments, and CenturyLink may elect to finance these endeavors by incurring additional indebtedness. Moreover, to respond to competitive challenges, CenturyLink may be required to raise substantial additional capital to finance new product or service offerings. CenturyLink’s ability to arrange additional financing will depend on, among other factors, its financial position and performance, as well as prevailing market conditions and other factors beyond CenturyLink’s control. CenturyLink cannot assure you that it will be able to obtain additional financing on terms acceptable to it or at all. If CenturyLink is able to obtain additional financing, its credit ratings could be further adversely affected, which could further raise CenturyLink’s borrowing costs and further limit its future access to capital and its ability to satisfy its obligations under its indebtedness.

Adverse changes in the value of assets or obligations associated with CenturyLink’s employee benefit plans could negatively impact its financial results or financial position.

 

Following the merger, CenturyLink will maintain multiple qualified pension plans, non-qualified pension plans and post-retirement benefit plans, several of which are currently underfunded. Adverse changes in interest rates or market conditions, among other assumptions and factors, could cause a significant increase in the benefit obligations under these plans or a significant decrease in the value of plan assets. With respect to the qualified pension plans, adverse changes could require CenturyLink to contribute a material amount of cash to the plans or could accelerate the timing of any required cash payments. The process of calculating benefit obligations is complex. The amount of required contributions to these plans in future years will depend on earnings on investments, discount rates, changes in the plans and funding laws and regulations. Any future material cash contributions could have a negative impact on CenturyLink’s financial results or financial position.

 

CenturyLink has a significant amount of goodwill and other intangible assets on its balance sheet, and these amounts will increase as a result of the merger. If its goodwill or other intangible assets become impaired in the future, CenturyLink may be required to record a significant, non-cash charge to earnings and reduce its shareholders’ equity.

 

Under GAAP, intangible assets are reviewed for impairment on an annual basis or more frequently whenever events or circumstances indicate that its carrying value may not be recoverable. If CenturyLink’s intangible assets are determined to be impaired in the future, CenturyLink may be required to record a significant, non-cash charge to earnings during the period in which the impairment is determined.

 

CenturyLink cannot assure you that it will be able to continue paying dividends at the current rate.

 

As noted elsewhere in this proxy statement/prospectus, CenturyLink plans to continue its current dividend practices following the merger. However, you should be aware that CenturyLink shareholders may not receive the same dividends following the merger for reasons that may include any of the following factors:

 

 

CenturyLink’s common shareholders should be aware that they have no contractual or other legal right to dividends that have not been declared.

CenturyLink faces other risks.

 

The risks listed above are not exhaustive, and you should be aware that following the merger CenturyLink will face various other risks, including those discussed in reports filed by CenturyLink, Qwest and Savvis with the SEC.

 

This proxy statement/prospectus and the documents incorporated by reference into this proxy statement/prospectus contain certain forecasts and other forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, business strategies, operating efficiencies or synergies, revenue enhancements, and competitive positions, growth opportunities, plans and objectives of the management of each of CenturyLink and Savvis, the merger and the markets for CenturyLink and Savvis common stock and other matters. Statements in this proxy statement/prospectus and the documents incorporated by reference herein that are not historical facts are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Exchange Act and Section 27A of the Securities Act. These forward-looking statements, including, without limitation, those relating to the future business prospects, revenues and income of CenturyLink and Savvis, wherever they occur in this proxy statement/prospectus or the documents incorporated by reference herein, are necessarily estimates reflecting the best judgment of the respective managements of CenturyLink and Savvis and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should, therefore, be considered in light of various important factors, including those set forth in and incorporated by reference into this proxy statement/prospectus.

 

Words such as “estimate,” “project,” “plan,” “intend,” “expect,” “anticipate,” “believe,” “would,” “should,” “may,” “could” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are found at various places throughout this proxy statement/prospectus, including in the section entitled “Risk Factors” beginning on page [ • ]. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include those set forth in CenturyLink’s, Qwest’s and Savvis’ filings with the SEC, including their respective Annual Reports on Form 10-K for 2010, as updated by any subsequent Quarterly Reports on Form 10-Q. These important factors also include those set forth under “Risk Factors,” beginning on page [ • ], as well as, among others, risks and uncertainties relating to:

 

 

 

Due to these risks and uncertainties, there can be no assurances that the results anticipated by the forward-looking statements of CenturyLink or the forecasts or other forward-looking statements of Savvis will occur, that their respective judgments or assumptions will prove correct, or that unforeseen developments will not occur. Accordingly, you are cautioned not to place undue reliance upon any forecasts or other forward-looking statements of CenturyLink or Savvis, which speak only as of the date made. CenturyLink and Savvis undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise.

 

SAVVIS, Inc.

1 Savvis Parkway

Town & Country, Missouri 63017

(314) 628-7000

 

Savvis provides information technology services including cloud services, managed hosting, managed security, colocation, professional services and network services through Savvis’ global infrastructure to businesses and government agencies around the world. Savvis’ suite of products can be purchased individually, in various combinations, or as part of a total or partial outsourcing arrangement. Savvis’ colocation solutions meet the specific needs of clients who require control of their physical assets, while Savvis’ managed hosting solution offerings provide clients with access to Savvis’ services and infrastructure without the upfront capital costs associated with equipment acquisition. Shares of Savvis common stock currently trade on the NASDAQ under the stock symbol “SVVS.”

 

Additional information about Savvis and its subsidiaries is included in documents incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” on page [ • ].

 

CenturyLink, Inc.

100 CenturyLink Drive

Monroe, Louisiana 71203

(318) 388-9000

 

CenturyLink is an integrated communications company primarily engaged in providing an array of communications services, including local and long distance voice, data, Internet access, broadband, and satellite video services in select markets throughout a substantial portion of the continental United States. In certain local and regional markets, CenturyLink also sells communications equipment and provides fiber transport, competitive local exchange carrier, security monitoring, and other communications, professional and business information services. Shares of CenturyLink common stock trade on the NYSE under the stock symbol “CTL.”

 

On April 1, 2011, CenturyLink acquired Qwest in a merger transaction, which substantially expanded the size and scope of its business. CenturyLink estimates that immediately following that merger it operated approximately 15.0 million access lines and served approximately 5.4 million broadband customers and 1.7 million satellite video subscribers, based upon operating data of CenturyLink and Qwest as of March 31, 2011.

 

Additional information about CenturyLink and its subsidiaries is included in documents incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” on page [ • ].

 

Mimi Acquisition Company, a wholly owned subsidiary of CenturyLink, is a Delaware corporation formed on April 26, 2011 for the purpose of effecting the merger. Upon completion of the merger, Mimi Acquisition Company will be merged with and into Savvis and the name of the resulting company will be SAVVIS, Inc.

 

Mimi Acquisition Company has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement, including the preparation of applicable regulatory filings in connection with the merger.

 

The special meeting of Savvis stockholders is scheduled to be held at [  :   A.M.], local time, on [ • ], 2011 at 1 Savvis Parkway, Town & Country, Missouri 63017.

 

The special meeting of Savvis stockholders is being held:

 

 

The Savvis board of directors has determined that entering into the merger agreement was in the best interests of Savvis and its stockholders and declared the merger agreement advisable.

 

The Savvis board of directors unanimously recommends that you vote “FOR” the proposal to adopt the merger agreement, “FOR” the adjournment proposal and “FOR” the named executive officer merger-related compensation proposal.

 

Only holders of record of shares of Savvis common stock at the close of business on [ • ], 2011 are entitled to notice of, and to vote at, the Savvis special meeting and at an adjournment of the meeting. We refer to this date as the record date for the meeting. A complete list of stockholders of record of Savvis entitled to vote at the Savvis special meeting will be available for the 10 days before the Savvis special meeting at Savvis’ executive offices and principal place of business at 1 Savvis Parkway, Town & Country, Missouri 63017 for inspection by stockholders of Savvis during ordinary business hours for any purpose germane to the Savvis special meeting. The list will also be available at the Savvis special meeting for examination by any stockholder of Savvis of record present at the special meeting.

 

In connection with the execution of the merger agreement, Welsh, Carson, Anderson & Stowe VIII, L.P., which we refer to as WCAS, and certain related parties (which we refer to collectively with WCAS as the WCAS stockholders) have entered into a voting agreement, dated as of April 26, 2011, with CenturyLink. As of May 16, 2011, there were 13,105,304 shares, constituting approximately 22.8% of the outstanding common

stock of Savvis, subject to the voting agreement. The WCAS stockholders have agreed in the voting agreement to vote all shares of Savvis common stock beneficially owned by them (i) in favor of the adoption of the merger agreement and any action reasonably requested by CenturyLink in furtherance thereof, (ii) against any action or agreement that would reasonably be expected to result in a breach of the merger agreement by Savvis or the voting agreement by any WCAS stockholder, (iii) against any change in the board of directors of Savvis and (iv) against any alternative takeover proposals with a third party and any action involving Savvis that is intended, or would reasonably be expected, to interfere with or delay the merger, among other things.

 

As of the record date for the Savvis’ special meeting, the directors and executive officers of Savvis as a group owned and were entitled to vote [ • ] shares of the common stock of Savvis, or approximately [ • ]% of the outstanding shares of the common stock of Savvis on that date. Savvis currently expects that its directors and executive officers will vote their shares in favor of adoption of the merger agreement, but, other than Patrick J. Welsh and Thomas E. McInerney, who, as WCAS stockholders, are parties to the voting agreement with CenturyLink, none of Savvis’ directors or executive officers have entered into any agreement obligating them to do so.

 

A quorum is necessary to hold a valid special meeting of Savvis stockholders. A quorum will be present at the Savvis special meeting if the holders of a majority of the outstanding shares of the common stock of Savvis entitled to vote on the record date are present, in person or by proxy. If a quorum is not present at the Savvis special meeting, Savvis expects the presiding officer to adjourn the special meeting in order to solicit additional proxies. Abstentions and broker non-votes will be counted as present for purposes of determining whether a quorum is present.

 

The adoption of the merger agreement requires the affirmative vote of holders of a majority of the outstanding shares of common stock of Savvis entitled to vote on the proposal. The adjournment proposal and the named executive officer merger-related compensation proposal each requires the affirmative vote of holders of a majority of the shares of Savvis common stock entitled to vote on the proposal present or represented by proxy at the special meeting.

 

Your failure to vote, or failure to instruct your broker, bank or nominee to vote, will have the same effect as a vote against the proposal to adopt the merger agreement, but will have no effect on the adjournment proposal or the named executive officer merger-related compensation proposal. Your abstention from voting will have the same effect as a vote against the proposal to adopt the merger agreement, the adjournment proposal and the named executive officer merger-related compensation proposal.

 

Whether or not you plan to attend the Savvis special meeting, please promptly vote your shares of Savvis common stock by proxy to ensure your shares are represented at the meeting. You may also vote in person at the Savvis special meeting.

 

If you plan to attend the Savvis special meeting and wish to vote in person, you will be given a ballot at the special meeting. Please note, however, that if your shares of Savvis common stock are held in “street name,” which means your shares of Savvis common stock are held of record by a broker, bank or other nominee, and you wish to vote at the Savvis special meeting, you must bring to the Savvis special meeting a proxy from the record holder (your broker, bank or nominee) of the shares of Savvis common stock authorizing you to vote at the Savvis special meeting.

 

You should vote your proxy even if you plan to attend the Savvis special meeting. You can always change your vote at the Savvis special meeting.

 

Your enclosed proxy card includes specific instructions for voting your shares of Savvis common stock. Savvis’ electronic voting procedures are designed to authenticate your identity and to ensure that your votes are accurately recorded. When the accompanying proxy is returned properly executed, the shares of Savvis common stock represented by it will be voted at the Savvis special meeting or any adjournment thereof in accordance with the instructions contained in the proxy.

 

If you return your signed proxy card without indicating how you want your shares of Savvis common stock to be voted with regard to a particular proposal, your shares of Savvis common stock will be voted in favor of each such proposal. Proxy cards that are returned without a signature will not be counted as present at the Savvis special meeting and cannot be voted.

 

If your shares of Savvis common stock are held in an account with a broker, bank or other nominee, you have received a separate voting instruction card in lieu of a proxy card and you must follow those instructions in order to vote.

 

You have the power to revoke your proxy at any time before your proxy is voted at the Savvis special meeting. You can revoke your proxy or voting instructions in one of four ways:

 

 

If you choose either of the first two methods, your notice of revocation or your new proxy must be received by Savvis’ Corporate Secretary at 1 Savvis Parkway, Town & Country, Missouri 63017 no later than the beginning of the Savvis special meeting.

 

In accordance with the merger agreement, the cost of proxy solicitation for the Savvis special meeting will be borne by Savvis. In addition to the use of the mail, proxies may be solicited by officers and directors and regular employees of Savvis, without additional remuneration, by personal interview, telephone, facsimile or otherwise. Savvis will also request brokers, banks and nominees to forward proxy materials to the beneficial owners of shares of Savvis common stock held of record on the record date and will provide customary reimbursement to such firms for the cost of forwarding these materials. Savvis has retained Innisfree M&A Incorporated to assist in its solicitation of proxies and has agreed to pay them a fee of approximately $25,000, plus reasonable expenses, for these services.

 

Upon completion of the merger, Mimi Acquisition Company, a wholly owned subsidiary of CenturyLink formed for the purpose of effecting the merger, will merge with and into Savvis. Savvis will be the surviving corporation in the merger and will thereby become a wholly owned subsidiary of CenturyLink.

 

In the merger, each outstanding share of Savvis common stock (other than shares owned by Savvis, CenturyLink, or Mimi Acquisition Company, which will be cancelled, and other than shares held by holders who properly exercise dissenters’ rights) will be converted on the effective date of the merger into the right to receive (i) $30.00 in cash and (ii) a fraction of a share of CenturyLink common stock at an exchange ratio equal to (x) $10.00 divided by (y) the volume-weighted average trading price of CenturyLink common stock over the 30 trading day period ending three trading days prior to the closing (which we refer to as the CenturyLink 30-day average price), except that if the CenturyLink 30-day average price is less than or equal to $34.42, each such Savvis share will be converted into the right to receive $30.00 in cash and 0.2905 of a CenturyLink share. The exchange ratio mechanism effectively provides for the stock consideration to have a fixed value (based on the CenturyLink 30-day average price) of $10.00 per share of Savvis common stock so long as the CenturyLink 30-day average price is at least $34.42. Cash will be paid in lieu of any fractional shares.

 

See “Comparison of Shareholder Rights” beginning on page [ • ] for a summary of the material differences between the rights of holders of CenturyLink common stock and the rights of holders of Savvis common stock.

 

Savvis operates in a rapidly changing, capital-intensive industry that is increasingly characterized by larger competitors with a lower cost of capital and greater resources. Savvis’ board of directors and management periodically reviews and assesses its position in the market, as well as financial and strategic alternatives that would maximize stockholder value.

 

As part of these periodic reviews, the Savvis board of directors regularly discussed the prospects of Savvis’ network business, including the portions of Savvis’ network services that are either in slower growth or declining markets or are not directly tied to the future growth of Savvis’ network and hosting businesses, which portions we refer to as the sustaining network business. In particular, the Savvis board of directors has previously evaluated the impact of Savvis’ sustaining network business on the company’s overall growth profile, and considered whether to divest the sustaining network business or its entire network business as well as other strategic alternatives. But for several reasons, including the difficulty of separating out the portions of the network business that are necessary to support the hosting business, the Savvis board of directors believed that such a divestiture was not a feasible strategy.

 

Over the past year, the hosting industry has seen rapid and significant consolidation, as new well-capitalized entrants have invested in the industry and existing competitors have sought to lower their operating costs by combining operations. Amidst this consolidation and increasing competitive pressure caused by larger competitors with lower cost of capital, the Savvis board of directors continued to focus on ways to maximize stockholder value, including evaluating various potential strategic alternatives, such as raising capital to fund organic growth or acquisitions, joint ventures, divesting Savvis’ sustaining network business, and a potential sale of all of the stock or assets of Savvis.

 

At a meeting of the Savvis board of directors held on August 4, 2010, Barclays Capital, which had been invited to present to the Savvis board of directors in connection with the board’s evaluation of ways to maximize Savvis stockholder value, gave a detailed presentation on numerous topics, including Savvis’ competitive position, market perception, current market environment, current market value, relevant strategic transactions, and how Savvis could continue to create incremental value for its stockholders. Barclays Capital did not enter into an engagement letter with Savvis with respect to a possible transaction. The Savvis board of

directors reviewed the company’s record of executing against the existing management plan, and evaluated and discussed several strategic options including acquisition opportunities, partial divestitures and a potential sale of Savvis.

 

Following the board meeting, Savvis’ Chairman and Chief Executive Officer, James E. Ousley, and Chief Financial Officer, Gregory W. Freiberg, had ongoing, periodic discussions with several large investment banking firms and boutique financial advisory firms to discuss Savvis’ existing valuation, market position and the prospects for either a sale of Savvis or a strategic transaction to support its long-term growth in the hosting industry.

 

In November of 2010, Savvis’ largest stockholder, Welsh, Carson, Anderson & Stowe, VIII, L.P., which we refer to as WCAS, informed Mr. Ousley of its intent to explore opportunities to exit its long term, mature investment in Savvis. On November 26, 2010, Savvis entered into a non-disclosure agreement with a significant stockholder of Savvis, which we refer to as Company A. Company A requested that Savvis provide Company A with certain investor rights in connection with a proposed purchase by Company A of a block of Savvis’ common stock from WCAS. In connection with considering Company A’s request, the Savvis board of directors sought appropriate safeguards to protect value for all Savvis’ stockholders, including a standstill agreement. Discussions with respect to this proposed transaction were terminated in December 2010 as the parties ultimately could not reach agreement on certain terms.

 

On December 7, 2010, WCAS distributed 5 million shares of Savvis, or approximately one quarter of its equity stake at that time, to its general and limited partners.

 

In early January 2011, Company A approached Savvis again, this time to discuss a substantial direct equity investment in Savvis combined with a purchase of Savvis shares then held by WCAS. The Savvis board of directors considered using the proceeds of this proposed issuance for various capital expenditures and to fund international expansion or selective acquisitions that would further Savvis’ ability to compete in a consolidating industry with significant capital expenditure requirements.

 

On January 13, 2011, Company A provided Savvis with an indicative term sheet setting forth the proposed terms of the equity issuance. The Savvis board of directors considered this offer, but did not reach agreement with Company A due to valuation concerns, and authorized Mr. Ousley to continue to negotiate in an effort to increase the valuation offered by Company A. As negotiations progressed, Mr. Ousley had discussions with several large investment banking firms and boutique financial advisory firms in an effort to evaluate the value that would be delivered by the proposed transaction with Company A.

 

As part of the efforts to evaluate value, in late January 2011, Savvis began exploratory discussions regarding several potential strategic transactions.

 

On January 23, 2011, Mr. Ousley and Mr. Freiberg met with members of management of CenturyLink, including Glen F. Post, III, its Chief Executive Officer and President, R. Stewart Ewing, Jr., its Chief Financial Officer, and Stacey W. Goff, its Executive Vice President, General Counsel and Secretary. Also at the meeting were representatives of Barclays Capital, who had arranged the meeting between Savvis and CenturyLink representatives. CenturyLink had from time to time over the past several years assessed strategic opportunities in the hosting sector, including possible acquisitions of hosting companies, and Barclays Capital had previously discussed with CenturyLink possible acquisition opportunities in the hosting sector, including at a meeting of the CenturyLink board of directors in November 2010. At the January 23, 2011 meeting, the parties discussed the benefits of potential strategic alternatives, such as potential commercial arrangements as well as a possible business combination. No specific proposal was made, however, and the parties agreed to continue discussions of possible strategic alternatives.

 

On January 24, 2011, Mr. Ousley met with representatives of another potential strategic buyer, which we refer to as Company B, to discuss potential strategic alternatives. The parties discussed the consolidation in the industry and the strategic advantages of a possible combination between Savvis and Company B.

 

On January 25, 2011, the Savvis board of directors held a telephonic meeting. During this meeting, the Savvis board of directors discussed the proposed terms of the equity investment by Company A. Mr. Ousley

also provided the Savvis board of directors with an update regarding initial discussions with CenturyLink and Company B regarding a potential strategic transaction. The Savvis board of directors failed to reach agreement on Company A’s proposal, but authorized Mr. Ousley to continue negotiations with Company A to increase the valuation proposed by Company A. Shortly thereafter, Mr. Ousley resumed discussions with Company A, but Mr. Ousley and Company A could not reach agreement on valuation and certain other terms, and as a result both parties agreed to defer negotiations of the proposed term sheet and definitive transaction documentation until after Savvis released its fiscal year 2010 financial results on February 8, 2011.

 

On January 27, 2011, Terremark Worldwide, Inc., a competitor of Savvis and one of the leading managed hosting companies in the industry, announced it had entered into a definitive merger agreement with Verizon Communications, Inc. In the days following this announcement, Savvis experienced significant appreciation in its stock price, which Savvis believed to be the result of market anticipation that Savvis would also become an acquisition target.

 

On January 28, 2011, Mr. Ousley and Mr. Post spoke again and discussed several different potential strategic transaction structures and the possible benefits of a potential strategic transaction, including the creation of an enhanced network platform with growth opportunities in the hosting business. Mr. Post indicated that CenturyLink would be willing to consider an acquisition of Savvis at a premium to current market prices.

 

On January 31, 2011, Company B approached Savvis with an interest to pursue more detailed discussions regarding a potential strategic transaction. In connection with Company B’s expression of interest, Company B delivered a draft non-disclosure agreement that would protect the confidentiality of any such discussions. After negotiation, on February 3, 2011 Savvis signed a non-disclosure agreement with Company B and provided Company B with initial information regarding Savvis.

 

On February 1, 2011, NaviSite, Inc., another competitor of Savvis and a managed hosting company, announced it had entered into a definitive merger agreement with Time Warner Cable Inc. Following this announcement, Savvis experienced further appreciation in its stock price, which Savvis believed to be the result of continued speculation that Savvis would also become an acquisition target.

 

On February 1, 2011, Mr. Ousley received a call from a representative of an international telecommunications company and existing partner of Savvis, which we refer to as Company C, who expressed interest in exploring strategic options with Savvis. The parties agreed to draft a non-disclosure agreement to facilitate further discussions.

 

During the month of February, Savvis met with a number of large investment banking firms, including Morgan Stanley, and boutique financial advisory firms, in connection with its consideration of potential financial advisors to assist it regarding the evaluation of strategic options, including by assessing the competitive landscape, exploring alternative financing options and developing a list of potential candidates to contact regarding a potential acquisition of Savvis.

 

From February 4, 2011 through February 11, 2011, Savvis negotiated a non-disclosure agreement with CenturyLink. On February 11, 2011, Savvis entered into a non-disclosure agreement with a subsidiary of CenturyLink, CenturyTel Service Group, LLC, and Qwest. Qwest had previously entered into a merger agreement with CenturyLink, and the merger was expected to be completed shortly.

 

On February 9, 2011, Mr. Ousley and Mr. Freiberg met with several representatives of another financial advisory firm to discuss Savvis’ valuation, the strategic landscape in the hosting industry and the prospects for an acquisition of Savvis.

 

On February 11, 2011, representatives of CenturyLink led by Dennis Huber, Executive Vice President, Network Services, had a discussion with representatives of Savvis, including Mr. Freiberg, Michael A. Taylor, Vice President, Network Engineering and Operations, Jens P. Teagan, Vice President, Corporate Development, Bryan S. Doerr, Chief Technology Officer and William D. Fathers, President, regarding business due diligence on Savvis’ network business. After the meeting, the parties agreed to continue discussions.

On February 16, 2011, representatives of Savvis, including Messrs. Ousley, Doerr, Fathers, Freiberg and Teagan, and Brian Klingbeil, General Manager, met with representatives from Company B to provide Company B with an overview of Savvis’ business. After the meeting, the parties agreed to continue discussions.

 

On February 17, 2011, Savvis met with representatives of Morgan Stanley to consider whether to retain Morgan Stanley as its financial advisor. Savvis also interviewed other large investment banking firms and boutique financial advisory firms in connection with its search for a financial advisor to assist it in exploring potential strategic options.

 

Also on February 17, 2011, Savvis entered into a non-disclosure agreement with Company C and representatives of Savvis engaged in initial discussions with Company C regarding various strategic transaction structures. Such discussions did not result in any proposal by Company C regarding a potential transaction.

 

In the middle of February, Company A indicated that it was no longer interested in a strategic investment in Savvis due to the significant appreciation in Savvis’ stock price from the time that Company A initially began negotiations with Savvis.

 

On February 22, 2011, at the request of CenturyLink, Merrill Lynch, Pierce, Fenner & Smith Incorporated, which we also refer to as BofA Merrill Lynch, which had been a financial advisor to CenturyLink in its merger transaction with Embarq, made a presentation to the CenturyLink board of directors regarding the hosting industry, CenturyLink’s competitive and strategic position in the hosting segment, various potential strategic targets, including Savvis, and a specific evaluation of Savvis as a potential acquisition candidate.

 

On February 23, 2011, Mr. Ousley and Mr. Fathers met with representatives from Company B to discuss a potential strategic transaction in greater detail. During this discussion, the parties also followed up on their most recent diligence meeting and discussed next steps.

 

Later in the day on February 23, 2011, Mr. Ousley and Mr. Post continued discussions regarding a potential strategic transaction between Savvis and CenturyLink. At this meeting, the parties also followed up on their most recent diligence meeting and discussed next steps.

 

On February 24, 2011, at a meeting of the Savvis board of directors, Morgan Stanley reviewed with the board various potential alternatives for maximizing Savvis stockholder value, including potential strategic transactions for Savvis, such as the potential sale of Savvis, potential acquirers, and a preliminary valuation framework including implied valuations for Savvis based on customary methodologies. Also at this meeting, the Savvis board of directors evaluated and considered a spectrum of strategic options including an equity investment by or sale of the entire company to potential strategic or financial acquirers, refinancing Savvis’ existing debt and raising additional debt to finance acquisitions by Savvis or organic international expansion capital expenditures. Based on Morgan Stanley’s presentation and a presentation of the chairman of the Savvis board of directors in executive session, the Savvis board of directors considered both potential strategic and financial acquirers, with an emphasis on acquirers with a strategic rationale to acquire Savvis that would maximize valuation. At that time, the Savvis board of directors evaluated the alternatives and authorized continued discussions with the two potential acquirers that had already begun due diligence, CenturyLink and Company B, as well as additional potential buyers. The Savvis board of directors also authorized Savvis’ management to pursue a process to maximize stockholder value with the assistance of Morgan Stanley.

 

On March 2, Mr. Ousley updated the board of directors on discussions with CenturyLink and Company B as well as the results to date of Morgan Stanley’s ongoing consideration of potential buyers.

 

On March 9, 2011, Mr. Ousley and Mr. Post met and discussed a potential transaction, including the strategic advantages of combining the two companies.

 

On March 10, 2011, Morgan Stanley contacted Company B to determine whether Company B was interested in further discussing a potential transaction with Savvis. Company B indicated that it was interested in continuing to review information and pursuing discussions.

On March 11, 2011, Savvis discussed a potential transaction with another potential strategic acquirer, which we refer to as Company D, and the parties agreed to continue discussions. Such discussions did not result in any proposal by Company D regarding a potential transaction.

 

On March 15, 2011, Savvis executed a non-disclosure agreement with another potential strategic acquirer, which we refer to as Company E, to facilitate Company E’s due diligence on Savvis and exploration of a potential transaction.

 

On March 15, 2011, Mr. Ousley briefed the Savvis board of directors on discussions with CenturyLink and Company B, including the results of and feedback from in person diligence sessions that had been conducted with each, as well as the non-disclosure agreement and initial information provided to Company E.

 

In mid-March, at the direction of Savvis, Morgan Stanley contacted Company D again, as well as two other potential strategic acquirers, which we refer to as Company F and Company G, to assess their interest in a potential transaction with or acquisition of Savvis.

 

On March 16, 2011, Morgan Stanley briefed Savvis’ management about its discussions with Company F and indicated that, based on Company F’s response, it did not appear that an acquisition proposal on attractive terms was a likely outcome. As a result, Savvis instructed Morgan Stanley to keep Company F apprised of developments but to prioritize other potential buyers who had expressed stronger interest in a potential transaction. At the direction of Savvis, Morgan Stanley also engaged in additional efforts to solicit interest from Company E in a potential transaction with Savvis.

 

On March 22, 2011, Morgan Stanley reported that a potential strategic acquirer, which we refer to as Company H, had requested a meeting to determine whether to move forward with a potential strategic transaction. Savvis instructed Morgan Stanley to arrange such a meeting.

 

On March 23, 2011, representatives from CenturyLink, including Mr. Ewing, attended in-depth business presentations from the Savvis leadership team, including Messrs. Fathers, Doerr, Freiberg, Klingbeil and Teagan and Jeffrey H. Von Deylen, Senior Vice President, Global Operations and Global Client Services. At this meeting, CenturyLink provided Savvis with information on its hosting business and the anticipated structure of CenturyLink following the closing of its acquisition of Qwest. Savvis gave a comprehensive presentation about its business, potential growth opportunities, a financial overview and the benefits and possible cost and revenue synergies that might result from a strategic transaction with CenturyLink. In the meeting, CenturyLink representatives indicated that they thought Savvis was a good cultural fit, and that CenturyLink was prepared to further pursue a potential transaction. As a result of the meeting, Savvis determined that CenturyLink was seriously interested in pursuing a potential transaction, but at that time was focused on the closing of the Qwest transaction.

 

At a meeting of the CenturyLink board of directors, also on March 23, 2011, Mr. Post provided an update to the board regarding discussions held to date between the managements of CenturyLink and Savvis, preliminary due diligence findings, timing considerations, certain strategic considerations, and certain risks associated with such a transaction.

 

Also on March 23, 2011, at the direction of Savvis, Morgan Stanley spoke with Company E and Company H. Each of these companies later indicated that it was unwilling to pursue a potential transaction.

 

On March 24, 2011, at the direction of Savvis, Morgan Stanley talked with certain senior management of Company F about a potential transaction. Company F did not indicate any interest in pursuing a potential transaction.

 

On March 25, 2011, Mr. Post communicated to Mr. Ousley that CenturyLink would like to continue discussions regarding a potential transaction.

 

On March 29, 2011, Company E confirmed to Morgan Stanley that it had decided not to pursue a potential transaction with Savvis. Also on that date, Morgan Stanley spoke with Mr. Ewing of CenturyLink, who indicated that CenturyLink was interested in additional discussions with Savvis following the closing of the Qwest acquisition, which was scheduled for April 1, 2011.

On March 31, 2011, CenturyLink requested that Barclays Capital, which had been a financial advisor to CenturyLink in its merger transactions with Embarq and Qwest, serve as its financial advisor, along with BofA Merrill Lynch, in connection with the potential transaction with Savvis.

 

In the course of discussions in late March and early April, CenturyLink proposed a merger with consideration of $38.00 per share of which 75% would be cash and 25% would be stock, based on a fixed exchange ratio.

 

On April 4, 2011, executive officers of Savvis and CenturyLink engaged in discussions regarding the potential valuation of Savvis in the context of an acquisition of Savvis by CenturyLink. At that time, the parties were unable to agree on valuation.

 

On April 7, 2011, a representative of Morgan Stanley spoke with Mr. Post who reaffirmed that he strongly believed in the strategic logic of the transaction, but remained concerned about valuation. In response to questions from the representative of Morgan Stanley, Mr. Post indicated that valuation was the principal issue regarding a potential transaction.

 

On April 8, 2011, Mr. Freiberg and Mr. Teagan from Savvis and Mr. Ewing and Bryan Taylor, Vice President, Corporate Development of CenturyLink had a call to discuss the potential transaction. On this call, CenturyLink made extensive diligence requests in order to better understand Savvis and Savvis indicated that it would not provide CenturyLink access to further due diligence data until CenturyLink could confirm that it was authorized to, and did in fact, increase its proposed price for Savvis. Also on April 8, 2011, Company G informed Morgan Stanley that it had decided not to pursue a potential transaction with Savvis.

 

On April 12, 2011, Mr. Post and Mr. Ousley discussed a potential price of $40.00 per share. At this point, Savvis agreed to provide CenturyLink with access to its due diligence dataroom, which was opened to CenturyLink on April 15, 2011. On April 13, 2011, Barclays Capital conveyed on behalf of CenturyLink to Morgan Stanley a request that Savvis enter into a 35-day exclusivity agreement, which Savvis declined. However, CenturyLink continued its due diligence efforts.

 

On April 13, 2011, at the direction of Savvis, Morgan Stanley contacted another potential strategic acquirer, which we refer to as Company I, who asked for additional information, including some of Savvis’ public filings. On April 16, 2011, Company I indicated that it was not interested in pursuing a transaction with Savvis.

 

On April 14, 2011, Peter J. Bazil, Savvis’ Vice President, General Counsel and Secretary, and Mr. Goff of CenturyLink had an initial discussion regarding the potential transaction. During the call, Mr. Goff informed Mr. Bazil that he had instructed Wachtell, Lipton, Rosen & Katz, counsel to CenturyLink, which we refer to as Wachtell Lipton, to begin drafting a merger agreement.

 

On April 15, 2011, on a call among representatives of CenturyLink, Wachtell Lipton, Jones, Walker, Waechter, Poitevent, Carrère & Denègre L.L.P., which we refer to as Jones Walker, also counsel to CenturyLink, Savvis and Wilson Sonsini Goodrich & Rosati, which we refer to as WSGR, counsel to Savvis, the parties began preliminary discussion and negotiation of certain key terms of a potential transaction, including, price and structure, financing, regulatory matters, diligence and timing, exclusivity, deal protection features, treatment of equity awards and closing conditions. With respect to price and structure, CenturyLink proposed a merger with consideration of $40.00 per share of which 75% would be cash and 25% would be stock, based on a fixed exchange ratio. Savvis indicated that the structure of the exchange ratio for any equity component of the merger consideration would require further discussion, in order to minimize price risk to Savvis stockholders. In regards to timing, Savvis suggested the parties work towards signing a definitive agreement by April 27, 2011, the date of Savvis’ planned release of its first quarter earnings. CenturyLink requested that Savvis enter into a 35-day exclusivity agreement commencing on April 19 after meetings of the respective boards of directors. The representative of Wachtell Lipton previewed certain terms that CenturyLink

proposed to include in its draft merger agreement, including that the closing of the transaction be conditioned upon certain key employees of Savvis remaining in place at closing pursuant to employment agreements to be entered into with CenturyLink at the time of execution of the merger agreement, a termination fee equal to 3.5% of the equity value of the proposed transaction, a “force the vote” provision requiring Savvis to hold its stockholder meeting to approve the proposed transaction even if the Savvis board of directors were to change its recommendation with respect to the proposed transaction, and a requirement that WCAS and certain related parties, which we refer to collectively with WCAS as the WCAS stockholders, enter into a voting agreement in connection with the transaction, which we refer to as the voting agreement. The representative of WSGR indicated that all of these proposed terms would require further discussion and negotiation between the parties.

 

On April 17, 2011, the Savvis board of directors held a special meeting, at which meeting Savvis’ senior management and representatives from WSGR and Morgan Stanley were present. A representative of Morgan Stanley provided an overview of CenturyLink’s preliminary proposal and reviewed a preliminary valuation analysis of Savvis and CenturyLink. Morgan Stanley also reported on the status of their discussions with potential acquirers, including Company B’s lack of interest in taking further steps to pursue a potential strategic transaction with Savvis despite an ongoing dialogue with Company B and Morgan Stanley concerning such steps. The representative of WSGR then reviewed the fiduciary duties of the board of directors in connection with a potential transaction, including considerations relating to the request by CenturyLink for an exclusivity agreement. At the meeting, the Savvis board of directors resolved to establish a Mergers and Acquisitions Committee to facilitate effective communications and for administrative convenience, which we refer to as the Mergers and Acquisitions Committee or the Committee, chaired by Dr. Pellow and consisting of Dr. Pellow, Mr. Heintzelman and Mr. McInerney, all of whom are independent directors and one of whom (Mr. McInerney) is associated with WCAS. The Savvis board of directors also authorized management to enter into an exclusivity agreement with CenturyLink, with an exclusivity period not to exceed 14 days, with other specific terms as approved by the Mergers and Acquisitions Committee.

 

On April 19, 2011, at a meeting of the CenturyLink board of directors, the board received a presentation regarding Savvis from Messrs. Ousley, Fathers and Von Deylen and a presentation, including preliminary financial analyses, from Barclays Capital and BofA Merrill Lynch. The CenturyLink board discussed a proposed transaction with Savvis and authorized management to continue negotiations. Following the board meeting, Mr. Ousley and Mr. Post discussed the status of the transaction, and Savvis’ interest in seeking to enter into and announce a transaction as soon as practicable. Also on that day, Wachtell Lipton delivered a draft merger agreement to WSGR. Among other things, the merger agreement reflected a fixed exchange ratio, a “force-the-vote” provision, the voting agreement, an $85 million termination fee, which was equal to approximately 3.5% of the equity value of the proposed transaction, a provision giving CenturyLink five business days to match any superior proposal submitted by a third party before the Savvis board could change its recommendation with respect to the CenturyLink transaction, a provision permitting either party to terminate the agreement if the closing did not occur by January 31, 2012 (subject to possible extension in certain circumstances), a requirement for certain key employees to agree to employment arrangements with CenturyLink at signing and be in place following the closing, no financing contingency, a commitment to pursue required regulatory approvals, a definition of “material adverse effect” with numerous exceptions to what constitutes a material adverse effect, and rollover of Savvis equity awards into CenturyLink equity awards.

 

On April 20, 2011, the Mergers and Acquisitions Committee held a meeting at which Mr. Ousley and Mr. Bazil were present. Mr. Bazil reviewed the terms of the draft merger agreement provided by CenturyLink, which Mr. Bazil had provided to the Committee. In his review, Mr. Bazil reviewed CenturyLink’s proposed fixed exchange ratio and the cash and stock nature of CenturyLink’s proposal. Mr. Bazil also reviewed certain key deal protection measures, including the proposed “force-the-vote” provision, the voting agreement, $85 million termination fee, and the request by CenturyLink for a five business day right to match any superior proposal submitted by a third party. Mr. Bazil then reviewed matters impacting the likelihood that the transaction would close including the proposed conditions to closing of the merger, the requirement that certain key executives remain employed at closing, regulatory matters, and the financing of the transaction. Mr. Bazil also discussed the potential treatment of equity awards in the transaction, including the potential

impact of such treatment on employee retention for the period between signing of the merger agreement and closing of the transaction and the effect that failing to retain key employees may have in the event that the transaction was not consummated. The members of the Mergers and Acquisitions Committee discussed the draft agreement and authorized management to provide a revised draft of the merger agreement to CenturyLink and instructed management and WSGR to discuss and negotiate the draft agreement with CenturyLink and Wachtell Lipton. The Mergers and Acquisitions Committee discussed the proposed terms of the draft exclusivity agreement presented by CenturyLink. After discussion and consideration of factors relevant to entering into an exclusivity arrangement, including the relatively brief duration of the exclusivity agreement, the lack of responses or inquiries from other third parties notwithstanding the efforts by Savvis to solicit other business combination proposals from strategic buyers, and the terms and conditions of the CenturyLink proposal, the Mergers and Acquisitions Committee authorized Savvis to enter into the exclusivity agreement with an expiration date of May 3, 2011 and certain other terms more favorable to Savvis than the draft provided by CenturyLink.

 

On April 21, 2011, the exclusivity agreement between Savvis and CenturyLink was executed, which provided for an exclusivity period through May 3, 2011.

 

Also on April 21, 2011, Wachtell Lipton delivered a draft of the voting agreement to WCAS, Savvis and Ropes & Gray, counsel to WCAS.

 

On April 22, 2011, Ropes & Gray delivered a revised draft of the voting agreement to CenturyLink and Wachtell Lipton, which provided that the voting agreement would terminate in the event that the Savvis board of directors changed its recommendation in response to a superior proposal. Also on April 22, 2011, Wachtell Lipton delivered to Savvis draft employment agreements to be entered into by Messrs. Ousley, Fathers, Doerr and Von Deylen that were substantially similar to their existing employment agreements with Savvis.

 

On April 23, 2011, the Mergers and Acquisitions Committee held a meeting at which Savvis’ senior management and outside legal counsel, WSGR, and financial advisors, Morgan Stanley, were present. A representative of WSGR reviewed the terms of the most recent draft of the Merger Agreement received from CenturyLink, including a review of the parties’ respective positions with regard to certain key terms. A representative of Morgan Stanley then updated the Committee on Morgan Stanley’s discussions with BofA Merrill Lynch and Barclays Capital, the financial advisors to CenturyLink, regarding the exchange ratio for the portion of the purchase price that would be paid in stock, which CenturyLink continued to insist should be fixed in order to provide certainty as to the number of shares issuable in the transaction. The members of the Committee discussed the terms of the draft Merger Agreement. The Committee then discussed retention of key management during the period between signing of the merger agreement and closing of the transaction and the effect that failing to retain key employees may have in the event that the transaction was not consummated, and noted the importance of the treatment of employee equity awards to retaining key management during the period between signing and closing. The Committee authorized management to continue to negotiate the terms of the proposed merger agreement.

 

Throughout this period, CenturyLink and Savvis and their respective advisors engaged in discussions on the terms of the merger agreement and CenturyLink, Savvis, WCAS and their respective advisors engaged in discussions on the terms of the voting agreement, and the parties exchanged drafts of these agreements reflecting these negotiations. On April 25, 2011, representatives of CenturyLink and Savvis reached an agreement at a meeting in St. Louis on terms to propose to their respective boards of directors. Regarding the stock component of the merger consideration, the parties agreed to a floating exchange ratio based on the volume-weighted average trading price of CenturyLink common stock over a 30 trading day period prior to closing, subject to a downside collar pursuant to which the exchange ratio would cease to increase if such average price fell more than 15% from the volume-weighted average trading price of CenturyLink’s common stock over the 30 trading day period ending on April 25, 2011. The parties also agreed on deal protection mechanisms as well as the treatment of Savvis’ outstanding equity awards in the merger.

 

In addition, although the parties had held discussions concerning the possible continued employment of Messrs. Ousley, Fathers, Doerr and Von Deylen following the closing of the merger and providing such executive officers with retention awards either pursuant to the new employment agreements or as stand-alone

arrangements, CenturyLink determined to defer any further discussions with respect to these matters until after execution of the merger agreement.

 

Also on April 25, 2011, Wachtell Lipton delivered a revised draft of the voting agreement to WCAS, Ropes & Gray, Savvis and WSGR, providing that such voting agreement would terminate in the event that the Savvis board of directors changed its recommendation in response to a superior proposal.

 

On April 26, 2011, CenturyLink, Wachtell Lipton and Jones Walker and Savvis and WSGR continued to negotiate the terms of the merger agreement. Wachtell Lipton then delivered a revised draft of the merger agreement to Savvis and WSGR.

 

On April 26, 2011, the Mergers and Acquisitions Committee met. Messrs. Ousley and Bazil and representatives of WSGR and Morgan Stanley were also present. Mr. Ousley reviewed the terms of the most recent draft merger agreement provided by CenturyLink, as well as the proposed resolution of certain key terms based upon discussions between Mr. Ousley and Mr. Bazil and their counterparts Mr. Post and Mr. Goff, at CenturyLink. Mr. Ousley reviewed the proposed terms resulting from negotiation with CenturyLink, including the proposed floating exchange ratio, subject to up to 15% downside collar protection, equity award treatment, “force-the-vote” provision, the voting agreement, including that such agreement would terminate upon a board change of recommendation in response to a superior proposal, $85 million termination fee, and lack of any closing conditions requiring certain key executives to be in place at closing. The Mergers and Acquisitions Committee then reviewed the results and progress in negotiations with CenturyLink, the results of the efforts by Savvis and its financial advisor to solicit alternative proposals prior to the exclusivity period, and the financial terms of the proposed transaction with CenturyLink. After discussion, the Committee unanimously resolved to recommend that the board of directors of Savvis adopt and approve the draft Merger Agreement.

 

On April 26, 2011, CenturyLink’s board of directors met to consider the negotiated terms of the proposed transaction. Mr. Post provided an update on and overview of the transaction to the board, following which members of CenturyLink management summarized the due diligence conducted by CenturyLink and its advisors on Savvis. A representative of Wachtell Lipton then reviewed the directors’ fiduciary duties in connection with their consideration of the transaction.Mr. Ewing then discussed the potential synergies of the transaction, following which representatives of BofA Merrill Lynch and Barclays Capital provided a presentation regarding the transaction. A representative of Wachtell Lipton and Mr. Goff then reviewed the terms of the merger agreement and voting agreement, and discussed employee matters in connection with the transaction. Following discussion, CenturyLink’s board of directors declared by unanimous vote of the directors present that the merger and the other transactions contemplated by the merger agreement were advisable and in the best interests of CenturyLink and its shareholders and approved the merger agreement.

 

On April 26, 2011, the Savvis board of directors met. Messrs. Ousley, Freiberg and Bazil as well as representatives of WSGR and Morgan Stanley were present. A representative of Morgan Stanley summarized the due diligence conducted by Savvis and its advisors on CenturyLink, including short-term and long-term estimates of CenturyLink’s financial results derived from public sources, and CenturyLink’s integration of Qwest. The representatives of Morgan Stanley then summarized the key terms of the proposed transaction and provided an overview of the process conducted by Savvis and its financial advisor. The representatives of Morgan Stanley then reviewed with the board of directors its financial analyses regarding the proposed transaction with CenturyLink, following which the representatives of Morgan Stanley delivered to the board of directors of Savvis its oral opinion that, as of such date, and based upon and subject to the various assumptions, considerations, qualifications and limitations set forth in its written opinion, the consideration to be received by holders of shares of Savvis common stock (other than holders of certain excluded shares) pursuant to the merger agreement was fair, from a financial point of view, to such holders. Morgan Stanley subsequently confirmed this opinion in writing. See “The Merger — Opinion of Morgan Stanley & Co. Incorporated.” A representative of WSGR reviewed the directors’ fiduciary duties. Prior to the meeting, the board of directors was provided with a full written presentation regarding the directors’ fiduciary duties and a detailed summary of the terms of the transaction and the proposed merger agreement. Representatives of WSGR then reviewed the terms of the proposed merger agreement as well as the results of the legal due

diligence conducted by WSGR with respect to CenturyLink. Dr. Pellow provided an overview of the Mergers and Acquisitions Committee’s process and discussed the efforts previously undertaken to solicit business combination proposals from other potential acquirers. Dr. Pellow, on behalf of the Mergers and Acquisition Committee, presented the Mergers and Acquisitions Committee’s formal unanimous recommendation that the board of directors approve the merger agreement. Following discussion, the Savvis board of directors declared by unanimous vote of all directors present that the merger agreement and the merger with CenturyLink were advisable and in the best interests of Savvis’ stockholders, approved the merger agreement and the merger and recommended that Savvis’ stockholders adopt the merger agreement.

 

Following the board meetings, CenturyLink and Savvis and their respective legal advisors finalized the merger agreement, the terms of which are more fully described below under the section entitled “The Merger — The Merger Agreement” beginning on page [ • ], and CenturyLink, Savvis and Mimi Acquisition Company executed the merger agreement. CenturyLink and Savvis issued a joint press release before the market opened on April 27, 2011 announcing the entry into the merger agreement.

 

In reaching its conclusion that the merger agreement is advisable and in the best interests of Savvis and its stockholders, the Savvis board of directors consulted with management and legal, financial and other advisors, and considered a variety of factors weighing in favor of or relevant to the merger, including the factors and reasons described below.

 

 

 

In the course of its deliberations, the Savvis board of directors also considered a variety of risks and countervailing factors related to entering into the merger agreement and the proposed merger, including:

 

 

 

While the Savvis board of directors considered potentially negative and potentially positive factors, the Savvis board of directors concluded that, overall, the potentially positive factors outweighed the potentially negative factors.

 

The foregoing discussion summarizes the material information and factors considered by the Savvis board of directors in its consideration of the merger, but is not intended to be exhaustive and may not include all of the factors considered by the Savvis board of directors. The Savvis board of directors reached the decision to approve the merger agreement in light of the factors described above and other factors that each member of the Savvis board of directors voting on approval of the merger agreement felt were appropriate. In view of the variety of factors and the quality and amount of information considered, the Savvis board of directors as a whole did not find it practicable to and did not quantify or otherwise assign relative weights to the specific factors considered in reaching its determination but conducted an overall analysis of the transaction. Individual members of the Savvis board of directors may have given different relative considerations to different factors. It should be noted that this explanation of the reasoning of the Savvis board of directors and certain information presented in this section is forward-looking in nature and, therefore, the information should be read in light of the factors discussed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” in this proxy statement-prospectus, beginning on page [ • ].

 

The Savvis board of directors has determined that the terms of the merger are advisable and in the best interest of Savvis and its stockholders, has approved the terms of the merger agreement and the merger, and unanimously recommends that the stockholders of Savvis vote “FOR” the proposal to adopt the merger agreement.

 

Savvis retained Morgan Stanley to provide it with financial advisory services and a financial opinion in connection with a possible merger, sale or other strategic business combination. Savvis selected Morgan Stanley to act as its financial advisor based on Morgan Stanley’s qualifications, expertise and reputation and its knowledge of the business and affairs of Savvis. At a telephonic meeting of the Savvis board of directors on April 26, 2011, Morgan Stanley rendered its oral opinion, subsequently confirmed in writing, that as of April 26, 2011, and based upon and subject to the various assumptions, considerations, qualifications and limitations set forth in the written opinion, the consideration to be received by holders of shares of Savvis common stock (other than holders of certain excluded shares, namely, shares owned by Savvis, CenturyLink, or Mimi Acquisition Company, which will be cancelled, and shares held by holders who properly exercise dissenters’ rights) pursuant to the merger agreement was fair from a financial point of view to such holders.

 

The full text of the written opinion of Morgan Stanley, dated as of April 26, 2011, is attached to this proxy statement as Annex B. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion. We encourage you to read the entire opinion carefully and in its entirety. Morgan Stanley’s opinion is directed to the Savvis board of directors and addresses only the fairness from a financial point of view of the consideration to be received by holders of shares of Savvis common stock (other than holders of certain excluded shares) pursuant to the merger agreement, as of the date of the opinion. It does not address any other aspects of the merger or the prices at which the CenturyLink common stock will trade at any time, and does not constitute a recommendation to any holder of Savvis common stock as to how to vote at any stockholder’s meeting held in connection with

the merger or whether to take any other action with respect to the merger. The summary of the opinion of Morgan Stanley set forth below is qualified in its entirety by reference to the full text of the opinion.

 

In connection with rendering its opinion, Morgan Stanley, among other things:

 

 

In arriving at its opinion, Morgan Stanley assumed and relied upon, with the consent of the Savvis board of directors and without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to Morgan Stanley by Savvis and CenturyLink and formed a substantial basis for its opinion. With respect to the financial projections, including information relating to certain strategic, financial and operational benefits anticipated from the merger, Morgan Stanley assumed, with the consent of the Savvis board of directors, that they had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the respective managements of Savvis and CenturyLink of the future financial performance of Savvis and CenturyLink. In addition, Morgan Stanley assumed, with the consent of the Savvis board of directors, that the merger will be consummated in accordance with the terms set forth in the merger agreement without any waiver, amendment or delay of any terms or conditions, that the definitive merger agreement would not differ in any material respect from the draft furnished to Morgan Stanley and that CenturyLink will have sufficient committed financing for purposes of consummating the merger. Morgan Stanley assumed, with the consent of the Savvis board of directors, that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the proposed merger, no delays, limitations, conditions or restrictions will be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the proposed merger.

Morgan Stanley is not a legal, tax or regulatory advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification, the assessment of Savvis and its legal, tax or regulatory advisors with respect to legal, tax or regulatory matters. Morgan Stanley expressed no view on, and its opinion did not address, any other term or aspect of the merger agreement or the merger or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into in connection with the merger, including, without limitation, the voting agreement, or the fairness of the transactions contemplated thereby to or any consideration received in connection therewith by, the holders of any class of securities or instruments, creditors or other constituencies of Savvis. Morgan Stanley also expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of Savvis’ officers, directors or employees, or any class of such persons, relative to the consideration to be received by the holders of shares of Savvis common stock in the merger. Morgan Stanley’s opinion did not address the relative merits of the merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or were available. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of Savvis or CenturyLink nor was Morgan Stanley furnished with any such valuations or appraisals. Morgan Stanley’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Morgan Stanley as of, April 26, 2011. Events occurring after April 26, 2011 may affect its opinion and the assumptions used in preparing it, and Morgan Stanley did not assume any obligation to update, revise or reaffirm its opinion.

 

The following is a brief summary of the material analyses performed by Morgan Stanley in connection with its oral opinion and the preparation of its written opinion letter dated April 26, 2011. The various analyses summarized below were based on the closing price of $37.08 per share of Savvis common stock as of April 25, 2011, the last full trading day prior to the date of the meeting of the Savvis board of directors to consider and approve the execution of the merger agreement. For purposes of its analyses, Morgan Stanley assumed that the consideration per share of Savvis common stock pursuant to the merger agreement had a value of $40.00. Certain of these summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses used by Morgan Stanley, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses.

 

Historical Trading Prices

 

Morgan Stanley performed a trading range analysis with respect to the historical share prices of Savvis common stock. Morgan Stanley reviewed the range of closing prices of Savvis common stock for various periods ending on April 25, 2011. Morgan Stanley observed the following:

 

 

Morgan Stanley observed that Savvis common stock closed at $37.08 on April 25, 2011 (the last full trading day prior to the date of the meeting of the Savvis board of directors to consider and approve the execution of the merger agreement) and closed at $36.02 on April 26, 2011 (the last full trading day prior to the announcement of execution of the merger agreement and prior to the meeting of the Savvis board of directors). Morgan Stanley noted that the assumed value of the consideration per share of Savvis common stock of $40.00 pursuant to the merger agreement reflected a 8.0% and 11.0% premium to the respective closing price per share of Savvis common stock as of April 25, 2011 and April 26, 2011, respectively.

 

Equity Research Analysts’ Future Price Targets

 

Morgan Stanley reviewed and analyzed future public market trading price targets for Savvis common stock prepared and published by equity research analysts following February 8, 2011 and prior to April 25, 2011. These one-year forward targets reflected each analyst’s estimate of the future public market trading price of Savvis common stock and are not discounted to reflect present values. The range of undiscounted

analyst price targets for Savvis common stock was $32.00 to $45.00 per share as of April 25, 2011 and Morgan Stanley noted that the median undiscounted analyst price target was $38.00 per share. The range of analyst price targets per share for Savvis common stock discounted at 11.0% to reflect Savvis’ estimated cost of equity capital was $28.83 to $40.54 per share as of April 25, 2011, and Morgan Stanley noted that the median discounted analyst price target was $34.23 per share.

 

Morgan Stanley noted that the research price targets have risen over the past six months as strategic acquisition activity in the sector has accelerated. Therefore, Morgan Stanley also reviewed and analyzed those future public market trading price targets for Savvis common stock prepared and published by equity research analysts prior to the announcement of the acquisition of Terremark Worldwide, Inc. by Verizon Communications Inc. on January 27, 2011. The range of these undiscounted analyst price targets for Savvis common stock prior to January 27, 2011 was $25.00 to $35.00 per share and Morgan Stanley noted that the median undiscounted analyst price target prior to January 27, 2011 was $30.00 per share. The median discounted analysts price target for Savvis common stock prior to January 27, 2011 discounted at 11% to reflect Savvis’ estimated cost of equity capital was $27.03 per share.

 

The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for Savvis common stock and these estimates are subject to uncertainties, including the future financial performance of Savvis and future financial market conditions.

 

Public Trading Comparables Analysis

 

Morgan Stanley performed a public trading comparables analysis, which attempts to provide an implied value of a company by comparing it to similar companies that are publicly traded. Morgan Stanley compared certain financial information of Savvis with comparable publicly available consensus equity research estimates for companies that share similar business characteristics such as those that provide cloud hosting and networking information technology services, which we refer to as the comparable companies. The comparable companies were:

 

 

For purposes of this comparative analysis, Morgan Stanley analyzed for each of these comparable companies the multiple of market capitalization plus total debt less cash and cash equivalents, which we refer to as aggregate value, to estimated earnings before interest, taxes, depreciation and amortization, which we refer to as EBITDA, for calendar years 2011 and 2012 (in each case, based on publicly available consensus estimates).

 

Based on the analysis of the relevant metrics for each of the comparable companies, Morgan Stanley selected representative ranges of financial multiples and applied these ranges of multiples to the relevant Savvis financial statistic. For purposes of estimated calendar year 2011 EBITDA, Morgan Stanley utilized publicly available estimates prepared by equity research analysts and available to Morgan Stanley as of April 25, 2011, which we refer to as the research case.

 

Based on the number of shares of Savvis’ common stock outstanding on a fully diluted basis (including outstanding options, restricted stock units, and convertible debt) as of April 25, 2011, Morgan Stanley calculated the estimated implied value per share of common stock of Savvis as of April 25, 2011.

 

The following table summarizes Morgan Stanley’s analysis:

 

Morgan Stanley observed that Savvis common stock closed at $37.08 on April 25, 2011 (the last full trading day prior to the date of the meeting of the Savvis board of directors to consider and approve the execution of the merger agreement).

 

No company utilized in the public trading comparables analysis is identical to Savvis. In evaluating the comparability of companies to Savvis and selecting the comparable companies listed above, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Savvis, such as the impact of competition on the businesses of Savvis and the industry generally, industry growth and the absence of any adverse material change in the financial condition and prospects of Savvis or the industry or in the financial markets in general. Mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using comparable company data.

 

Discounted Equity Value Analysis

 

Morgan Stanley performed a discounted equity value analysis, which is designed to imply a future value of a company’s common equity as a function of its estimated future EBITDA and a potential range of aggregate value to EBITDA multiples. The resulting value is subsequently discounted to arrive at a present value for such company’s stock price. In connection with this analysis, Morgan Stanley calculated a range of present equity values per share of Savvis’ common stock. To calculate the discounted equity value, Morgan Stanley used forecasts from the research case and estimates prepared by Savvis’ management, which we refer to as the management case. For purposes of this analysis, Morgan Stanley used calendar year 2013 EBITDA forecasts from the research case and estimates of income from continuing operations before depreciation, amortization, accretion and non-cash equity-based compensation, and excluding acquisition and integration costs, which we refer to as Adjusted EBITDA, from the management case. Morgan Stanley applied a range of EBITDA multiples to these estimates and applied a discount rate ranging from 10.0% to 12.0% to reflect Savvis’ estimated cost of equity capital.

 

The following table summarizes Morgan Stanley’s analysis:

 

 

Morgan Stanley also calculated ranges of implied equity values per share for CenturyLink, based on discounted equity values that were based on estimated leveraged free cash flow, which we sometimes refer to as LFCF, and EBITDA for calendar years 2012, 2013 and 2014 utilizing wall street analyst estimates from FactSet. In arriving at the estimated equity values per share of CenturyLink’s common stock, Morgan Stanley applied a 9.3x multiple to CenturyLink’s estimated leveraged free cash flow for calendar years 2012, 2013 and 2014 and a 5.6x EBITDA multiple to CenturyLink’s estimated EBITDA for calendar years 2012, 2013 and 2014. Morgan Stanley then added the projected value of the projected dividends paid on CenturyLink’s common stock over the periods and calculated the present value of these resulting numbers utilizing a 10% cost of capital.

 

The following table summarizes Morgan Stanley’s analysis:

 

Morgan Stanley noted that the closing stock price of CenturyLink common stock on April 25, 2011, the last full trading day prior to the date of the meeting of the Savvis board of directors to consider and approve the execution of the merger agreement, was $39.39.

 

Analysis of Precedent Transactions

 

Morgan Stanley performed a precedent transactions analysis, which is designed to imply a value of a company based on publicly available financial terms of selected transactions that share some characteristics with the merger. In connection with its analysis of precedent transactions, Morgan Stanley compared publicly available statistics for ten selected transactions announced from April 2010 to April 2011 that Morgan Stanley deemed to be similar in certain respects to the merger because such transactions involved companies in industry sectors in which Savvis operates. Morgan Stanley reviewed the price paid and calculated the ratio of aggregate value implied by the price paid to EBITDA for the forward calendar year (based on publicly available information). Based on this analysis, Morgan Stanley selected a range of multiples implied by these transactions and applied this range of multiples to Savvis’ projected Adjusted EBITDA for calendar year 2011 utilizing the management case to imply a value per share of Savvis common stock based on such multiples.

 

For this analysis Morgan Stanley reviewed the following transactions and selected the three most recently announced transactions in calculating the comparable company multiple range:

 

Selected Sector Transactions

 

 

The following table summarizes Morgan Stanley’s analysis:

 

 

Morgan Stanley noted that the assumed value of the consideration to be received by holders of shares of Savvis common stock pursuant to the merger agreement was $40.00 per share.

 

No company or transaction utilized in the precedent transactions analysis is identical to Savvis or the merger. In evaluating the selected sector transactions and selecting the three precedent transactions, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, market and financial conditions and other matters, which are beyond the control of Savvis and CenturyLink, such as the impact of competition on the business of Savvis, CenturyLink or the industry generally, growth of the industry and the absence of any adverse material change in the financial condition of Savvis, CenturyLink or the industry or in the financial markets in general, which could affect the public trading value of the companies and the aggregate value and equity value of the transactions to which they are being compared.

Discounted Cash Flow Analysis

 

Morgan Stanley performed a discounted cash flow analysis as of April 25, 2011 which is designed to imply a value of Savvis by calculating the present value of projected unlevered future free cash flows of Savvis. Morgan Stanley calculated ranges of implied equity values per share for Savvis, based on a discounted cash flow analysis utilizing publicly available estimates of leveraged free cash flow from the research case and estimates of leveraged free cash flow from the management case for the calendar years 2011 through 2015. In arriving at the estimated equity values per share of Savvis’ common stock, Morgan Stanley calculated a terminal value by applying terminal multiples ranging from 6.0x to 8.0x for fiscal year 2015 EBITDA from the research case and fiscal year 2015 Adjusted EBITDA from the management case. The unlevered free cash flows and the terminal value were then discounted to present values using a range of weighted average cost of capital from 9.0% to 10.0%. The weighted average cost of capital is a measure of the average expected return on all of a given company’s equity securities and debt based on their proportions in such company’s capital structure. The discounted cash flow analysis implied a range of $23.64 per share to $35.16 per share using the research case, and $29.49 per share to $42.85 per share using the management case. Morgan Stanley noted that the assumed value of the consideration to be received by holders of shares of Savvis common stock pursuant to the merger agreement was $40.00 per share.

 

Leveraged Buyout Analysis

 

Morgan Stanley performed an illustrative leveraged buyout analysis to estimate the theoretical prices at which a financial sponsor might effect a leveraged buyout of Savvis. For purposes of this analysis, Morgan Stanley assumed that a financial buyer would attempt to realize a return on its investment in fiscal year 2015, with a valuation of Savvis realized by the financial sponsor in such subsequent exit transaction based on an 6.0x to 8.0x aggregate value to fiscal year 2015 EBITDA multiple for the research case and fiscal year 2015 Adjusted EBITDA multiple for the management case. Morgan Stanley utilized EBITDA projections from the research case and Adjusted EBITDA projections from the management case in performing its analysis. For purposes of this analysis, Morgan Stanley assumed an illustrative multiple of debt to last-twelve-months EBITDA or Adjusted EBITDA at the transaction date of 6.0x. Morgan Stanley then derived a range of theoretical purchase prices based on an assumed required internal rate of return for a financial buyer of between 17.5% and 22.5%. This analysis implied a value range of $22.56 per share to $31.76 per share using the research case and $26.08 per share to $37.22 per share using the management case. Morgan Stanley noted that the assumed value of the consideration to be received by holders of shares of Savvis common stock pursuant to the merger agreement was $40.00 per share.

 

General

 

In connection with the review of the merger by the Savvis board of directors, Morgan Stanley performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a financial opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, Morgan Stanley considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Morgan Stanley believes that selecting any portion of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying its analyses and opinion. In addition, Morgan Stanley may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Morgan Stanley’s view of the actual value of Savvis or CenturyLink. In performing its analyses, Morgan Stanley made numerous assumptions with respect to industry performance, general business and economic conditions and other matters. Many of these assumptions are beyond the control of Savvis or CenturyLink. Any estimates contained in Morgan Stanley’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.

 

Morgan Stanley conducted the analyses described above solely as part of its analysis of the fairness of the consideration pursuant to the merger agreement from a financial point of view to holders of shares of Savvis

common stock (other than holders of certain excluded shares) and in connection with the delivery of its opinion, dated April 26, 2011, to the Savvis board of directors. These analyses do not purport to be appraisals or to reflect the prices at which shares of common stock of Savvis or CenturyLink might actually trade.

 

The per share merger consideration to be received by the holders of shares of Savvis common stock was determined through arm’s length negotiations between Savvis and CenturyLink and was approved by the Savvis board of directors. Morgan Stanley provided advice to the Savvis board of directors during these negotiations. Morgan Stanley did not, however, recommend any specific consideration to Savvis or its board of directors or that any specific consideration constituted the only appropriate consideration for the merger.

 

Morgan Stanley’s opinion and its presentation to the Savvis board of directors was one of many factors taken into consideration by the Savvis board of directors in deciding to approve the execution of the merger agreement. Consequently, the Morgan Stanley analyses as described above should not be viewed as determinative of the opinion of the Savvis board of directors with respect to the merger consideration, or of whether the Savvis board of directors would have been willing to agree to different consideration.

 

The Savvis board of directors retained Morgan Stanley based upon Morgan Stanley’s qualifications, experience and expertise and its knowledge of the business affairs of Savvis. Morgan Stanley is a global financial services firm engaged in the securities, investment management and individual wealth management businesses. Its securities business is engaged in securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading, prime brokerage, as well as providing investment banking, financing and financial advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance positions, and may trade or otherwise structure and effect transactions, for their own account or the accounts of its customers, in debt or equity securities or loans of CenturyLink, Savvis, or any other company, or any currency or commodity, that may be involved in the merger, or any related derivative instrument.

 

Under the terms of its engagement letter, Morgan Stanley provided Savvis financial advisory services and a financial opinion in connection with the merger, and Savvis has agreed to pay Morgan Stanley an aggregate fee of approximately $19.7 million for its services, which fee may vary based on the stock consideration issued in the merger. As part of the aggregate fee due to Morgan Stanley, $1.0 million was payable upon announcement of the merger and the remaining amount is contingent upon the closing of the merger. Savvis has also agreed to reimburse Morgan Stanley for its reasonable documented expenses, including fees of outside counsel and other professional advisors, incurred in connection with its services, which expenses shall not exceed $75,000 without the prior consent of Savvis, such consent not to be unreasonably withheld. In addition, Savvis has agreed to indemnify Morgan Stanley and its affiliates, their respective directors, officers, agents and employees and each person, if any, controlling Morgan Stanley or any of its affiliates against certain liabilities and expenses relating to or arising out of Morgan Stanley’s engagement. In the two years prior to the date of its opinion, Morgan Stanley has provided financial advisory and financing services for both CenturyLink and Savvis and has received fees in connection with such services, including receiving a fee of approximately $14.0 million for providing financial advisory services to CenturyLink in its acquisition of Embarq and receiving a fee of approximately $2.4 million for providing financing services in connection with Savvis’ 2010 $550 million term loan. Morgan Stanley may also seek to provide such services to CenturyLink and Savvis in the future and expects to receive fees for the rendering of these services. Morgan Stanley’s opinion was approved by a committee of Morgan Stanley investment banking and other professionals in accordance with its customary practice.

 

Upon completion of the merger, the board of directors and executive officers of CenturyLink are expected to remain unchanged, except that Mr. James E. Ousley, currently the Chairman and Chief Executive Officer of Savvis, is expected to become an executive officer of CenturyLink. For information on CenturyLink’s current directors and executive officers, please see CenturyLink’s proxy statement dated April 4, 2011. See “Where You Can Find More Information” beginning on page [ • ].

CenturyLink anticipates integrating its hosting business and Savvis’ managed hosting and cloud service operations into a single CenturyLink business unit. This integrated hosting business will be based in St. Louis and is expected to be led primarily by key members of the Savvis leadership team, including Savvis Chairman and Chief Executive Officer, James E. Ousley.

 

The following is a summary of the material United States federal income tax consequences of the merger to United States holders (as defined below) of Savvis common stock whose shares are converted into the right to receive the merger consideration pursuant to the merger. This summary is based on the Internal Revenue Code of 1986, as amended, applicable Treasury regulations, and administrative and judicial interpretations thereof, all as in effect as of the date of this proxy statement/prospectus, and all of which may change, possibly with retroactive effect. This summary assumes that shares of Savvis common stock are held as capital assets (generally, property held for investment). It does not address all of the United States federal income tax consequences that may be relevant to United States holders in light of their particular circumstances, or to other types of holders, including, without limitation:

 

 

In addition, this discussion does not address any United States state or local or non-United States tax consequences of the merger.

 

CenturyLink and Savvis urge each Savvis stockholder to consult its own tax advisor regarding the United States federal income or other tax consequences of the merger to the stockholder.

 

For purposes of this discussion, a United States holder means a holder of Savvis common stock who is, for United States federal income tax purposes:

 

 

 

If a partnership (or other entity treated as a partnership for United States federal income tax purposes) holds Savvis common stock, the tax treatment of a partner in the partnership (or other entity) will generally depend upon the status of the partner and the activities of the partnership (or other entity). If you are a partner of a partnership (or other entity) holding Savvis common stock, you should consult your tax advisor regarding the tax consequences of the merger.

 

Consequences of the Merger

 

The receipt of the merger consideration in exchange for shares of Savvis common stock pursuant to the merger will be a taxable transaction for United States federal income tax purposes. In general, a United States holder who receives the merger consideration in exchange for shares of Savvis common stock pursuant to the merger will recognize capital gain or loss for United States federal income tax purposes equal to the difference, if any, between (i) the fair market value of the CenturyLink common stock as of the effective time of the merger and the amount of cash received and (ii) the holder’s adjusted tax basis in the shares of Savvis common stock exchanged for the merger consideration pursuant to the merger. Any gain or loss would be long-term capital gain or loss if the holding period for the shares of Savvis common stock exceeds one year at the effective time of the merger. Long-term capital gains of noncorporate United States holders (including individuals) generally are eligible for preferential rates of United States federal income tax. There are limitations on the deductibility of capital losses under the Internal Revenue Code.

 

A United States holder’s aggregate tax basis in CenturyLink common stock received in the merger will equal the fair market value of the stock as of the effective time of the merger. The holding period of the CenturyLink common stock received in the merger will begin on the day after the merger.

 

Backup Withholding

 

Backup withholding at a rate of 28% may apply to payments made in connection with the merger. Backup withholding will not apply, however, to a holder who (i) furnishes a correct taxpayer identification number and certifies that it is not subject to backup withholding on the substitute Internal Revenue Service Form W-9 included in the letter of transmittal to be delivered to holders of Savvis common stock prior to completion of the merger, (ii) provides a certification of non-United States status on the applicable Internal Revenue Service Form W-8 (typically Internal Revenue Service Form W-8BEN) or appropriate successor form or (iii) is otherwise exempt from backup withholding. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against the holder’s United States federal income tax liability provided the required information is timely furnished to the Internal Revenue Service. Please consult your own tax advisor to see if you qualify for exemption from backup withholding and, if so, to understand the procedure for obtaining that exemption.

 

THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OF THE POTENTIAL TAX CONSIDERATIONS RELATING TO THE MERGER, AND IS NOT TAX ADVICE. THEREFORE, HOLDERS OF SAVVIS COMMON STOCK ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY OF UNITED STATES FEDERAL, STATE OR LOCAL, NON-UNITED STATES AND OTHER TAX LAWS.

 

CenturyLink prepares its financial statements in accordance with GAAP. The merger will be accounted for by applying the acquisition method using the accounting guidance for business combinations, ASC 805, which requires the determination of the acquirer, the acquisition date, the fair value of assets and liabilities of the acquiree and the measurement of goodwill. Based on the guidance of ASC 805, CenturyLink will be the acquirer of Savvis for accounting purposes. This means that CenturyLink will allocate the purchase price to

the fair value of Savvis’ assets and liabilities at the acquisition date, with any excess purchase price being recorded as goodwill. Assuming the CenturyLink 30-day average price is equal to or exceeds $34.42, CenturyLink anticipates that the aggregate value of the merger consideration (based on such average price) to be paid at closing will approximate $2.5 billion, based on the number of Savvis shares outstanding on the date of this proxy statement/prospectus.

 

HSR Act and Antitrust

 

The merger is subject to the requirements of the HSR Act, which prevents CenturyLink and Savvis from completing the merger until required information and materials are furnished to the Antitrust Division of the DOJ and the FTC and the HSR Act’s waiting period is terminated or expires. On May 16, 2011, CenturyLink and Savvis filed the requisite notification and report forms under the HSR Act with the DOJ and the FTC. The waiting period will expire at 11:59 p.m. on June 15, 2011, unless early terminated by the FTC. The DOJ or the FTC may extend the waiting period by requesting additional information or documentary material or the parties may otherwise agree to extend the waiting period. If the antitrust agencies make such a “second request” for information, the waiting period will expire at 11:59 p.m. on the thirtieth day after CenturyLink and Savvis have substantially complied with this request, unless the waiting period is terminated earlier or the parties otherwise agree to extend the waiting period. If the waiting period expires on a Saturday, Sunday or legal public holiday, then the period is extended until 11:59 p.m. the next day that is not a Saturday, Sunday or legal public holiday. The DOJ, the FTC and others may challenge the merger on antitrust grounds either before or after expiration or termination of the waiting period. Accordingly, at any time before or after the completion of the merger, any of the DOJ, the FTC or others could take action under the antitrust laws, including without limitation seeking to enjoin the completion of the merger or permitting completion subject to regulatory concessions or conditions. We cannot assure you that a challenge to the merger will not be made or that, if a challenge is made, it will not succeed.

 

FCC Approval

 

The Federal Communications Act of 1934, as amended, requires the approval of the FCC, prior to any transfer of control of certain types of licenses and other authorizations issued by the FCC. CenturyLink and Savvis expect to promptly file the required applications for FCC consent to the transfer of control to CenturyLink of the FCC licenses and authorizations held by Savvis and one of its subsidiaries. Savvis has advised the FCC staff of a 2007 change of control transaction that may have required FCC consent. The failure to obtain this consent prior to the 2007 change of control transaction could result in penalties or delays in receiving approval of the transaction contemplated under the merger agreement.

 

Other Regulatory Matters

 

CenturyLink and Savvis are required to provide (i) notification of the merger or supplemental information to the public utility commissions of two states in the U.S. and (ii) notification of the merger to certain regulatory bodies in various foreign countries where Savvis holds licenses.

 

Savvis and the members of the Savvis board of directors, CenturyLink and Mimi Acquisition Company have been named as defendants in a putative stockholder class action lawsuit filed on April 29, 2011 in the St. Louis County, Missouri Circuit Court, captioned Michael Jiannaras v. Savvis, Inc., et al., Case No. 11SL-CC01752, and three putative stockholder class action lawsuits filed in the Delaware Court of Chancery, the first filed on May 2, 2011, captioned Hilary Kramer v. James E. Ousley, et al., Case No. 6438, the second filed on May 6, 2011, captioned Tatyana Andreyeva v. James E. Ousley, et al., Case No. 6459, and the third filed on May 17, 2011, captioned Teamsters Union 25 Health Services & Insurance Plan v. James E. Ousley, et al., Case No. 6491. All four complaints assert, among other things, that Savvis’ directors allegedly breached their fiduciary duties and failed to maximize the value to be received by Savvis’ stockholders in the

merger, and that the other defendants aided and abetted those breaches. All four complaints seek, among other things, to enjoin the defendants from consummating the merger. Savvis believes all four lawsuits are without merit and will defend the lawsuits vigorously.

 

Prior to the effective time of the merger, CenturyLink will appoint an exchange agent to handle the exchange of shares of Savvis common stock for the merger consideration the holder is entitled to receive under the merger agreement. Promptly after the effective time of the merger (and in no event later than 10 business days after such time), the exchange agent will send to each holder of record of Savvis common stock at the effective time of the merger who holds shares of Savvis common stock in certificated form a letter of transmittal and instructions for effecting the exchange of Savvis common stock certificates for the merger consideration. Upon surrender of stock certificates for cancellation along with the executed letter of transmittal and other documents described in the instructions, a Savvis stockholder will receive the per share cash consideration and one or both of the following: (1) one or more shares of CenturyLink common stock; and (2) cash in lieu of fractional shares of CenturyLink common stock. After the effective time of the merger, Savvis will not register any transfers of the shares of Savvis common stock. Unless you specifically request to receive CenturyLink stock certificates, the shares of CenturyLink stock you receive in the merger will be issued in book-entry form.

 

Upon completion of the merger, shares of Savvis common stock held in the book-entry form will be automatically converted, at the exchange ratio, into the merger consideration, with any whole shares of CenturyLink common stock issued as stock consideration being issued in book-entry form. An account statement will be mailed to you confirming this automatic conversion, along with the cash consideration to which you are entitled and any cash in lieu of fractional shares of CenturyLink common stock.

 

In considering the recommendation of the Savvis board of directors to adopt the merger agreement, Savvis stockholders should be aware that certain Savvis directors and executive officers have interests in the merger that are different from, or in addition to, those of Savvis stockholders generally. These interests, which may create actual or potential conflicts of interest, are, to the extent material, described below. The Savvis board of directors was aware of these potential conflicts of interest and considered them, among other matters, in evaluating and negotiating the merger agreement, in reaching its decision to approve the merger agreement, and in recommending to Savvis stockholders that the merger agreement be adopted. For the purposes of all of the Savvis agreements and arrangements described below, the completion of the transactions contemplated by the merger agreement will constitute a change in control of Savvis.

 

Treatment of Savvis Equity Awards

 

The treatment of all equity awards, including those held by the executive officers of Savvis, is summarized below.

 

Treatment of Stock Options.  Pursuant to, and as further described in, the merger agreement, at the effective time of the merger, each option to purchase Savvis common stock under the Savvis stock plans outstanding immediately prior to the effective time will be assumed by CenturyLink and be converted into a vested option (whether or not previously vested) to purchase a number of CenturyLink common shares equal to the product of (i) the number of shares of Savvis common stock subject to the option and (ii) the stock award exchange ratio, as defined below, rounded down to the nearest whole share. The per share exercise price such assumed stock option will be equal to (i) the per share exercise price of the Savvis stock option divided by (ii) the stock award exchange ratio, rounded up to the nearest whole cent. Except as set forth above, each assumed stock option will be subject to the same terms and conditions as were applicable to the corresponding option to purchase Savvis common stock immediately prior to the effective time of the merger.

 

Treatment of Restricted Stock Units Other Than Restricted Stock Units Granted Under the Annual Incentive Plan.  Pursuant to, and as further described in, the merger agreement, with respect to the unvested

restricted stock units outstanding immediately prior to the effective time of the merger under the Savvis stock plans, other than those granted pursuant to the Savvis annual incentive plan, 50% of such restricted stock units held by each holder thereof will become vested, without regard to any applicable performance targets, at the effective time of the merger and be converted into the right to receive cash and CenturyLink common shares on the same terms as shares of Savvis common stock, subject to applicable tax withholdings.

 

The remaining 50% of such restricted stock units will be assumed by CenturyLink and converted at the effective time of the merger into CenturyLink restricted stock units, on the same terms and conditions as were applicable under such restricted stock units immediately prior to the effective time of the merger (other than with respect to any performance goals, which will cease to apply), reflecting the right to receive a number of CenturyLink common shares rounded to the nearest whole share, equal to the product of (i) the applicable number of shares of Savvis common stock subject to the restricted stock units multiplied by (ii) the stock award exchange ratio, except that the restricted stock units that do not vest at the effective time of the merger will vest, subject to the holder’s continued employment, on the later of the first anniversary of the closing date or December 31, 2012 (unless the holder’s employment is terminated without “cause” (as defined in the SAVVIS 2003 Incentive Compensation Plan) or the holder resigns for “good reason” (as defined in the merger agreement) prior to the vesting date, in which case the converted restricted stock units will immediately vest and settle upon the date of such holder’s termination of employment).

 

Treatment of Restricted Stock Units Granted Pursuant to the Annual Incentive Plan.  Pursuant to, and as further described in, the merger agreement, each unvested restricted stock unit outstanding immediately prior to the effective time of the merger under the Savvis annual incentive plan for the performance year in which the effective time of the merger occurs will be converted into the right to receive a cash payment equal to the product of (i) the number of shares of Savvis common stock earned based on the actual achievement of the applicable performance measures as of the effective time of the merger in accordance with the Savvis annual incentive plan (prorated for the portion of the year prior to the closing date), multiplied by (ii) the sum of $30 plus 25% of the closing price per share of CenturyLink common shares on the NYSE on the last trading day immediately preceding the closing date, multiplied by (iii) the quotient of the number of days in the applicable performance year through the closing date divided by 365.

 

For the purposes of the conversion of the Savvis stock options and Savvis restricted stock units described above, the stock award exchange ratio is the sum of (i) the exchange ratio and (ii) the quotient of $30.00 divided by the closing price per share for CenturyLink common shares on the NYSE on the last trading day immediately preceding the closing date.

 

Treatment of Restricted Stock.  Pursuant to, and as further described in, the merger agreement, each Savvis restricted stock award will vest in full immediately prior to the effective time and be converted into a right to receive cash and CenturyLink common shares on the same terms as other shares of Savvis common stock.

 

The following table identifies, for each executive officer of Savvis, the number of Savvis stock options that will vest and become exercisable, the number of Savvis restricted stock units (including restricted stock units granted under the Savvis annual incentive plan) that will vest and the number of shares of Savvis restricted stock that will vest, assuming for these purposes only that the employment of each of the executive officers is terminated on August 1, 2011, under circumstances that would entitle them to receive full accelerated vesting of their outstanding equity, and to receive full payment on the outstanding unvested

restricted stock units granted under the annual incentive plan, or AIP, as if all performance conditions had been satisfied.

 

 

 

 

Employee Stock Purchase Plan

 

Each of the executive officers are eligible to participate in the SAVVIS, Inc. Amended and Restated Employee Stock Purchase Plan, or the ESPP. Pursuant to the merger agreement, any offering period under the ESPP underway will be shortened and will terminate upon exercise no later than immediately prior to the effective time and the ESPP will terminate immediately prior to the effective time.

 

Employment Agreements with Savvis

 

Each of the executive officers of Savvis named below is a party to an employment agreement with Savvis that provides for severance benefits upon a termination of employment under certain circumstances and, in some cases, additional benefits upon a termination of employment following a change in control. The material severance related terms of each of the employment agreements are summarized below.

 

Each employment agreement requires the following conditions, requirements and obligations to have occurred in order for each Savvis executive officer to receive (or continue to receive) any severance benefits:

 

 

 

James E. Ousley.  Pursuant to the terms of Mr. Ousley’s employment agreement, if his employment is terminated without cause (as defined in his employment agreement) or he resigns with good reason (as defined in his employment agreement), he will receive:

 

 

If Mr. Ousley’s employment is terminated without cause or he resigns with good reason within 12 months following a change in control of Savvis, in addition to the severance described above, all of Mr. Ousley’s outstanding equity awards will fully vest and, to the extent applicable, become exercisable, provided that such equity awards remain outstanding following the change in control. Mr. Ousley will have the right to exercise any outstanding stock option until the earlier to occur of 12 months from the change in control and the expiration of such equity award and would be entitled to receive a pro-rated portion of his target bonus (rather than at the discretion of the Savvis compensation committee as is the case prior to a change in control of Savvis) for the year of termination under the applicable Savvis annual incentive plan.

 

In the event that a change in control of Savvis is consummated on or prior to December 31, 2011, Mr. Ousley’s employment agreement provides for a “gross-up” payment to make him whole for any federal excise tax imposed on payments or benefits received by Mr. Ousley under Section 4999 of the Internal Revenue Code, and any federal, state and local taxes associated with the “gross-up” payment.

 

Peter J. Bazil, Bryan S. Doerr, William D. Fathers, Gregory W. Freiberg, and Paul S. Hott.  Messrs. Bazil, Doerr, Fathers, Freiberg, and Hott are each party to substantially similar employment agreements. Pursuant to the employment agreements, if the executive’s employment is terminated without cause (as defined in the applicable employment agreement) or if the executive terminates for good reason (as defined in the applicable employment agreement), he will receive:

 

 

If the executive’s employment is terminated without cause or the executive terminates for good reason within 12 months of a change in control of Savvis, then, in addition to the severance payments described above, all of his outstanding equity awards shall fully vest and, to the extent applicable, become exercisable, provided that such equity awards remain outstanding following the change in control. The executive shall have the right to exercise any outstanding stock options until the earlier to occur of 12 months from the change in

control and the expiration of such stock option. In addition, the executive shall be entitled to receive a pro-rated portion of his target bonus for the year of termination (rather than at the discretion of the Savvis compensation committee as is the case prior to a change in control of Savvis) under the applicable Savvis annual incentive plan (rather than such payment being at the discretion of the compensation committee).

 

James D. Mori.  Mr. Mori’s employment agreement with Savvis provides that, if (i) Mr. Mori’s employment is terminated without cause or (ii) Mr. Mori resigns his employment following (a) an entity other than WCAS becoming the holder of more than 30% of the voting shares of Savvis, (b) being instructed to relocate from the St. Louis metropolitan area or (c) being reassigned to a position entailing materially reduced responsibilities or opportunities for compensation including, but not limited to, being reassigned to a position that has a lower total compensation opportunity than what is set forth in his employment agreement, then Mr. Mori would be entitled to:

 

 

Jeffrey H. Von Deylen.  Mr. Von Deylen’s employment agreement provides that if his employment is terminated without cause (as defined in his employment agreement) or if he terminates his employment for good reason (as defined in his employment agreement), he is entitled to receive:

 

 

In addition to the foregoing, upon a change in control of Savvis following which Mr. Von Deylen no longer has the same job title, role or responsibilities, all equity based awards granted to Mr. Von Deylen will fully vest and, to the extent applicable, become exercisable six months following the change in control of Savvis, or if Mr. Von Deylen’s employment is terminated without cause following a change in control of Savvis, all equity-based awards granted to Mr. Von Deylen will become fully vested and, to the extent applicable, exercisable, immediately following such termination of employment. Mr. Von Deylen’s employment agreement also provides for a “gross-up” payment to make him whole for any federal excise tax imposed on payments or benefits received by Mr. Von Deylen under Section 4999 of the Internal Revenue Code, and any federal, state and local taxes associated with the “gross-up” payment.

 

Possible Employment and Retention Arrangements

 

As indicated above in the section entitled “The Merger — Background of the Merger,” during the negotiations with respect to the merger agreement, CenturyLink had discussions concerning the possible continued employment of Messrs. Ousley, Fathers, Doerr and Von Deylen following the closing of the merger. CenturyLink proposed entering into new employment agreements that were substantially similar to their existing employment agreements with Savvis and the parties discussed providing such executive officers with retention awards either pursuant to the new employment agreements or as stand-alone arrangements. No such employment agreements or arrangements have been entered into, although discussions on these matters are ongoing.

 

Potential Payments upon a Termination In Connection with a Change in Control

 

Named Executive Officers.  The following table reflects the compensation and benefits that will be paid or provided to each of the named executive officers in the event a named executive officer’s employment is terminated by Savvis without cause or the named executive officer voluntarily resigns for good reason, in each case within 12 months following a change in control of Savvis (and based on the named executive officer’s current base salary and target bonus opportunity). Regardless of the manner in which a named executive officer’s employment terminates, the executive is entitled to receive amounts already earned during his term of

employment, such as base salary earned through the date of termination and accrued vacation pay. Please note that the amounts indicated below are estimates based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement/prospectus. Some of these assumptions are based on information currently available and, as a result, the actual amounts, if any, to be received by a named executive officer may differ in material respects from the amounts set forth below.

 

Golden Parachute Compensation (1)

 

 

 

 

Potential Severance Payments and Benefits for Executive Officers Other than Named Executive Officers. As described above, Messrs. Bazil, Doerr and Hott are entitled to severance upon a termination of employment by Savvis without cause or a resignation of employment for good reason following a change in control of Savvis. Assuming that each of the executive officers were terminated without cause or resign for good reason, in each case within 12 months following a change in control of Savvis, Messrs. Bazil, Doerr and Hott would be entitled to severance payments and benefits (including the value of continuation of benefits) of $195,000, $315,000 and $235,000, respectively.

 

No Compensation Payable to CenturyLink Named Executive Officers.  None of CenturyLink’s executive officers are entitled to receive compensation that is based on or otherwise relates to the merger.

 

Director and Officer Indemnification

 

Savvis directors and officers are entitled to continued indemnification and insurance coverage under the merger agreement for a period of six years after the merger is completed. For a more complete description, please see “The Merger Agreement — Indemnification and Insurance” on page [ • ].

 

CenturyLink currently pays an annual dividend of $2.90 per share. Savvis does not currently pay an annual dividend and has agreed in the merger agreement that it will not do so prior to the completion of the merger without CenturyLink’s prior written consent. Following the closing of the merger, CenturyLink expects to continue its current dividend for shareholders of the combined company, subject to any factors that its board of directors in its discretion deems relevant. See “CenturyLink cannot assure you that it will be able to continue paying dividends at the current rate,” in “Risk Factors — Other Risks.” For additional information on the treatment of dividends under the merger agreement, see “The Merger Agreement — Conduct of Business.”

 

CenturyLink’s common shares currently trade on the NYSE under the stock symbol “CTL”. It is a condition to the completion of the merger that the CenturyLink common stock issuable in the merger be approved for listing on the NYSE, subject to official notice of issuance. CenturyLink has agreed to use its reasonable best efforts to cause the CenturyLink common shares issuable in connection with the merger to be approved for listing on the NYSE and expects to obtain NYSE’s approval to list such shares prior to completion of the merger, subject to official notice of issuance.

 

Shares of Savvis common stock currently trade on the NASDAQ Global Select Market, or NASDAQ, under the stock symbol “SVVS”. When the merger is completed, the Savvis common stock currently listed on NASDAQ will cease to be quoted on NASDAQ and will be deregistered under the Exchange Act.

 

Savvis does not as a matter of course make public forecasts as to future performance, earnings or other results beyond the current fiscal year, and Savvis is especially reluctant to disclose forecasts for extended periods due to the unpredictability of the underlying assumptions and estimates. However, Savvis has included below certain information that was furnished to third parties and that was considered by Savvis’ financial advisor, Morgan Stanley, and by the board of directors of Savvis for the purposes of evaluating the merger. Note that the forecasts set forth below include the forecasts that are referred to as the management case in the section of this proxy statement/prospectus entitled “Opinion of Morgan Stanley & Co. Incorporated” beginning on page [ • ].

 

 

 

 

The internal financial forecasts were not prepared with a view toward public disclosure, nor were they prepared with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or GAAP. In addition, the projections were not prepared with the assistance of, or reviewed, compiled or examined by, independent accountants. The summary of these internal financial forecasts is not being included in this proxy statement/prospectus to influence your decision whether to vote for the merger, but because these internal financial forecasts were provided by Savvis to CenturyLink as well as to Savvis’ and CenturyLink’s financial advisors.

 

These internal financial forecasts were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of Savvis’ management. Important factors that may affect actual results and cause the internal financial forecasts not to be achieved include, but are not limited to, risks and uncertainties relating to Savvis’ business (including its ability to achieve strategic goals, objectives and targets over applicable periods), industry performance, the regulatory environment, general business and economic conditions and other factors described under “Cautionary Statement Regarding Forward-Looking Statements” beginning on page [ • ]. The internal financial forecasts also reflect assumptions as to certain business decisions that are subject to change. As a result, actual results may differ materially from those contained in these internal financial forecasts. Accordingly, there can be no assurance that the internal financial forecasts will be realized.

 

The inclusion of these internal financial forecasts in this proxy statement/prospectus should not be regarded as an indication that any of Savvis, CenturyLink or their respective affiliates, advisors or representatives considered the internal financial forecasts to be predictive of actual future events, and the internal financial forecasts should not be relied upon as such. None of Savvis, CenturyLink or their respective affiliates, advisors, officers, directors, partners or representatives can give you any assurance that actual results

will not differ from these internal financial forecasts, and none of them undertakes any obligation to update or otherwise revise or reconcile these internal financial forecasts to reflect circumstances existing after the date the internal financial forecasts were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the projections are shown to be in error. Savvis does not intend to make publicly available any update or other revision to these internal financial forecasts. Since the date of the internal financial forecasts, Savvis has made publicly available its actual results of operations for the quarter ended March 31, 2011. You should review Savvis’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 for this information. None of Savvis or its affiliates, advisors, officers, directors, partners or representatives has made or makes any representation to any stockholder or other person regarding Savvis’ ultimate performance compared to the information contained in these internal financial forecasts or that forecasted results will be achieved. Savvis has made no representation to CenturyLink, in the merger agreement or otherwise, concerning these internal financial forecasts.

 

The following summarizes material provisions of the merger agreement, which is attached as Annex A to this proxy statement/prospectus and is incorporated by reference herein. The rights and obligations of the parties are governed by the express terms and conditions of the merger agreement and not by this summary or any other information contained in this proxy statement/prospectus. Savvis stockholders are urged to read the merger agreement carefully and in its entirety as well as this proxy statement/prospectus before making any decisions regarding the merger.

 

In reviewing the merger agreement, please remember that it is included to provide you with information regarding its terms and is not intended to provide any other factual information about CenturyLink or Savvis. The merger agreement contains representations and warranties by each of the parties to the merger agreement. These representations and warranties have been made solely for the benefit of the other parties to the merger agreement and:

 

 

Accordingly, the representations and warranties and other provisions of the merger agreement should not be read alone, but instead should be read together with the information provided elsewhere in this proxy statement/prospectus and in the documents incorporated by reference herein. See “Where You Can Find More Information” on page [ • ].

 

Terms of the Merger

 

The merger agreement provides for the merger of Mimi Acquisition Company with and into Savvis. Savvis will be the surviving corporation in the merger and will become a subsidiary of CenturyLink. Each share of Savvis common stock issued and outstanding immediately prior to the completion of the merger, except for any shares of Savvis common stock held by Savvis, CenturyLink or Mimi Acquisition Company and shares held by holders who properly exercise dissenters’ rights, will be converted into the right to receive (i) $30.00 in cash and (ii) a fraction of a share of CenturyLink common stock equal to (x) $10.00 divided by (y) the volume-weighted average trading price per share taken to four decimal places of CenturyLink common stock as reported on the NYSE over the 30 trading day period ending three trading days prior to the closing, as calculated by Bloomberg Financial LP under the function “VWAP,” provided that if this average price is less than or equal to $34.42, each such Savvis share will be converted into the right to receive $30.00 in cash and 0.2905 of a share of CenturyLink common stock.

CenturyLink will not issue any fractional shares of CenturyLink common stock in the merger. Instead, a Savvis stockholder who otherwise would have received a fraction of a share of CenturyLink common stock will receive an amount in cash equal to such fractional amount multiplied by the last reported sale price of CenturyLink common stock on the NYSE on the last complete trading day prior to the effective time of the merger.

 

Completion of the Merger

 

Unless the parties agree otherwise, the closing of the merger will take place on a date specified by the parties, but no later than the fifth business day after all closing conditions have been satisfied or waived. The merger will be completed when the parties file a certificate of merger with the Delaware Secretary of State, unless the parties agree to a later time for the completion of the merger and specify that time in the certificate of merger.

 

We currently expect to complete the merger in the second half of 2011, subject to receipt of required stockholder and regulatory approvals and to the satisfaction or waiver of the other conditions to the merger described below.

 

Conditions to Completion of the Merger

 

The obligations of CenturyLink and Savvis to complete the merger are subject to the satisfaction or waiver of the following conditions: