Time Warner Agrees To Buy NaviSite For $230 Million In Cash

Time Warner Cable Inc. (TWC) agreed to acquire NaviSite Inc. (NAVI), a provider of outsourced Internet site hosting, for about $230 million in a deal meant to boost the cable giant's commercial services business.

The $5.50 per-share cash transaction represents a 33% premium to NaviSite's Tuesday closing price. NaviSite's stock was halted ahead of the news, while Time Warner's shares were up 0.1% to $68.80 in after-hours trading.

Time Warner Chairman and Chief Executive Glenn Britt said the commercial services business was "a key growth driver for the company and one in which we continue to see great opportunity." He added the company expects to build upon NaviSite's offerings to more rapidly serve small and medium sized businesses. NaviSite has more than 1,200 customers.

Time Warner said the deal is expected to add to its earnings and free cash flow and won't have a material impact on leverage ratios. The company said it expects to utilize NaviSite's net operating losses, which Time Warner believes will yield about $40 million in tax savings after the deal closes.

The transaction is expected to close in the second quarter, and is subject to NaviSite's shareholder approval.

The announcement comes five days after Time Warner said its fourth-quarter profit climbed 22%, continuing a trend of strong financial growth despite sluggish subscriber results. Time Warner also announced a 20% increase in its quarterly dividend.

NaviSite employs about 570 people and operates 10 data centers in the U.S. and the U.K. It also has network operation centers in India and Massachusetts.

-By John Kell, Dow Jones Newswires; 212-416-2480; [e-mail]