$25 billion merger of fiber providers geared toward delivering connectivity and digital services to enterprise customers
Confirming widespread speculation, CenturyLink today announced plans to acquire Level 3 in a cash and stock transaction worth $25 billion, according to the companies.
If approved, the combined operations will own and operate a network said to serve some 75,000 buildings in 350 metro markets.
According to Monroe, Louisiana-based CenturyLink, it will own 51% of the new company with Level 3 shareholders owning 49%. Under terms of the deal, Level 3 shareholders will receive $26.50 per share and a fixed exchange of 1.4286 shares of CenturyLink per share of Level 3.
“The digital economy relies on broadband connectivity, and together with Level 3 we will have one of the most robust fiber network and high-speed data services companies in the world,” said Glen Post, CenturyLink president and CEO. “This transaction furthers our commitment to providing our customers with the network to improve their lives and strengthen their businesses. It is this focus on providing fiber connectivity that will continue to distinguish CenturyLink from our competitors. CenturyLink shareholders will benefit from the significant synergies and financial flexibility provided by the combined company’s revenue growth and strong cash flow. For employees, this combination will bring together two highly customer-focused organizations and provide employees growth and advancement opportunities the companies could not offer separately.”
Level 3 President and CEO Jeff Storey said “This is a compelling transaction for our customers, shareholders and employees. In addition to the substantial value delivered to shareholders, the combined company will be uniquely positioned to meet the evolving and global needs of enterprise customers.”
Once the transaction closes the plan calls for Post to continue as CEO and President. Level 3 EVP and CFO Sunit Patel will serve as CFO of the new company. Company headquarters will be in Monroe, although it “will maintain a significant presence in Colorado and the Denver metropolitan area,” where Level 3 is based, according to CenturyLink.
CenturyLink, which was previously known as CenturyTel, started as a telephony provider and has grown into an enterprise connectivity provider with cloud and IT service offerings designed to leverage the firm’s 55 North American data centers, 250,000-route-miles of fiber in the U.S. and a 300,000-route-mile global transport network.
Level 3 is a major backbone provider also focused on enterprise connectivity and managed services, which operates in 60 countries on three continents.
The companies said combining operations would help realize operational savings of about $975 million per year, which “will enhance ability to invest in advanced networks.”
“These are two companies looking for scale and synergies in reaction to the struggles that both companies are facing in their core business to deliver on growth,” BTIG analyst Walter Piecyk told CNBC in an email.
JP Morgan Chase & Co. analyst Phil Cusick told Bloomberg, “The combination makes a lot of sense.”
