Kaufman Bros. Downgrades Savvis (SVVS) to Hold Following Offer by Centrylink

Kaufman Bros. downgraded shares of Savvis (NASDAQ: SVVS) to a Hold rating from its previous rating of Buy and is raising its price target from $37 to $40 following the offer by Centrylink.

The offer that Centrylink made to SVVS represents a 11% premium of the firms 2011 EBITDA estimate. This would allow shareholders to experience a ~50% YTD return due to speculation in the sector following other announcements.

Savvis stockholders will receive $30 per share in cash and $10 in shares of CenturyLink stock, subject to adjustments. Management at Savvis will remain with the company.

The company reported its quarterly earnings on April 27 with a total revenue of $257 million with $192 million of it coming from hosting revenue, which was up 26% Y/Y. SVVS also beat the firms EBITDA estimate of $66.1 million by $8.9 million. Management at Savvis noted that the lower SG&A was temporary and EBITDA would decline in Q2.

The firm comments that, "Savvis appears to have lost NYSE ARCA as a trading client at the end of Q1, which will have a negative impact on revenue in Q2."

For more ratings news on Savvis click here and for the rating history of Savvis click here.

Shares of Savvis closed at $36.02 yesterday.

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