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CenturyLink, a Network Provider, to Acquire Level 3, a Rival

  • CenturyLink’s shareholders will own 51 percent of the combined company, while Level 3’s will hold the rest.
  • Level 3 Communications has almost $10 billion of so-called net operating losses, a tax relief generated from periods of unprofitability.
  • Level 3 has almost $10 billion of so-called net operating losses, a tax relief generated from periods of unprofitability.
  • DealBook | CenturyLink, a Network Provider, to Acquire Level 3, a Rival
  • Based on the closing price of CenturyLink’s shares from Friday, this represents a price of about $69.92 a share.

In a $25 billion deal, the two companies will combine to create one of the largest communications providers for businesses.

@usnewstoday_: CenturyLink, a Network Provider, to Acquire Level 3, a Rival: In a $25 billion deal, …

CenturyLink agreed to merge with Level 3 Communications in a $25 billion deal that would create one of the largest communications providers for businesses.

The combined company would have about 500,000 route miles of fiber that carry broadband, video and voice that enable corporations to communicate. It would also produce about $19 billion in annual revenue on a pro forma basis.

Under the terms of the deal, CenturyLink, based in Monroe, La., will acquire Level 3 for $26.50 in cash and 1.4286 shares of CenturyLink stock for each Level 3 share, according to a statement issued by the companies on Monday.

Based on the closing price of CenturyLink’s shares from Friday, this represents a price of about $69.92 a share. Including Level 3’s $10.9 billion in debt, the transaction amounts to about $36 billion. That represents a premium of almost 50 percent from Level 3’s share price last Wednesday before reports surfaced of a potential deal.

CenturyLink’s shareholders will own 51 percent of the combined company, while Level 3’s will hold the rest.

“This transaction furthers our commitment to providing our customers with the network to improve their lives and strengthen their businesses,” Glen F. Post III, CenturyLink’s chief executive and president, said in a statement. “It is this focus on providing fiber connectivity that will continue to distinguish CenturyLink from our competitors.” Mr. Post would continue to serve in his executive role of the combined company.

Shares of CenturyLink were down 11.1 percent in morning trading on Monday, while shares of Level 3 were up 4.7 percent.

The transaction would significantly lower CenturyLink’s tax expense over the next few years. Level 3 has almost $10 billion of so-called net operating losses, a tax relief generated from periods of unprofitability.

The companies also plan to achieve about $975 million a year in cost savings by eliminating duplications and improving operations, the companies said in the statement.

The combined company would be based in Monroe, where CenturyLink was founded in 1968. However, they plan to keep a “significant presence” in Denver area, where Level 3 has its headquarters.

CenturyLink has received financing commitments from Bank of America Merrill Lynch and Morgan Stanley for $10.2 billion.

The companies expect to complete the transaction by the end of September 2017, subject to approvals by the Federal Communications Commission, certain states and the majority of both companies’ shareholders. STT Crossing, a subsidiary of ST Telemedia, which holds 18 percent of Level 3’s outstanding shares, has pledged to vote in favor of the transaction.

Bank of America and Morgan Stanley gave financial advice to CenturyLink, while Citigroup advised Level 3, with Lazard providing a fairness opinion. Evercore gave a fairness opinion to CenturyLink. The law firms Wachtell, Lipton, Rosen & Katz and Jones Walker worked with CenturyLink, while Willkie Farr & Gallagher, Latham & Watkins and Credit Suisse advised ST Telemedia.

CenturyLink, a Network Provider, to Acquire Level 3, a Rival