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The C&W offer is worth $3.40 per share, 8.7% more than the stock's $3.13 value when the market closed on May 11.
Digital Island provides web hosting, managed Internet services and content delivery services for corporate customers such as Cisco Systems and E-Trade Group. C&W is buying the company to beef up its managed services offerings and to strengthen its portfolio of data centres in the US.
Digital Island's share price has fallen dramatically over the course of last year's economic downturn. The company's share value peaked in December of 1999 at around $150 a share, giving it a market capitalisation of $12 billion. One year ago, Digital Island's market value was $2.2 billion.
Both companies have suffered setbacks in recent months. C&W has amassed a war chest of $9.9 billion but has also announced 4,000 job cuts as a result of the weakening global market. Digital Island posted losses of $1.1 billion last quarter, and announced it would lay off more than 200 of its 940 staff.
Contact Cable & Wireless at http://www.cwplc.com/ .
Digital Island at http://www.digitalisland.com/ .