Savvis Lands $20 Million in Funding

Global managed services provider Savvis Communications Corp. has secured a $20 million investment from Constellation Ventures, a Bear Stearns Asset Management Fund, in return for preferred stock.

by Roy Mark of www.internetnews.com [July 3, 2002]

The new relationship will facilitate Savvis' expansion beyond its strong position in financial services and mid-market enterprises into the growing media-intensive industries.

Under terms of the agreement, Savvis will issue to Constellation Ventures $20 million of 11.5 percent convertible preferred stock in exchange for cash. The preferred stock will be convertible initially into approximately 26.7 million shares of Savvis common stock at a conversion price of 75 cents per share and will have voting rights that allow the holders to vote with the common on an as-if-converted basis.

Dividends will be paid quarterly in the form of additional convertible preferred stock. Constellation Ventures will hold approximately 8 percent of Savvis' voting stock. In addition, Clifford H. Friedman, senior managing director of Constellation Ventures, will join the Savvis board of directors.

Savvis has also agreed to issue five-year warrants to Constellation Ventures to acquire 10 million shares of common stock at 75 cents per share. Constellation Ventures will earn the right to exercise the warrants as it aids Savvis in winning new business.

"Savvis represents a new breed of managed IP services provider," said Friedman. "At a time when the telecommunications industry is struggling with excessive debt and a glut of commodity-based products, Savvis' value-added services are growing and their balance sheet is strong. Savvis is delivering the highest availability and quality of service for bandwidth-intensive, mission critical applications—key attributes that are in growing demand by media-focused industries such as advertising, broadcasting, production, cable and publishing."

In March, Savvis secured $158 million from investors including Welsh, Carson, Anderson & Stowe. Combined with the new investment from Constellation Ventures, Savvis has raised $178 million in funding this year.

Savvis built its global data communications network to meet the standards of Wall Street. Building on this expertise, the company packaged its networking products for mid-sized enterprises, such as law firms, ad agencies, and real estate companies, two years ago.

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