CenturyLink To Acquire Level 3 Communications In $34 Bln Deal

(RTTNews) - CenturyLink Inc. (CTL) has agreed to acquire Level 3 Communications Inc. (LVLT) in a cash and stock transaction valued at about $34 billion, including the assumption of debt, the two communications companies said Monday.

CenturyLink expects the transaction to be accretive to its free cash flow in the first full year following the close of the transaction and be significantly accretive on an annual run-rate basis thereafter. The combined company is expected to generate $975 million of annual run-rate cash synergies.

The deal will enable CenturyLink to expand its fiber network and high-speed data services.

Under the terms of the deal, Level 3 shareholders will receive $26.50 per share in cash and a fixed exchange ratio of 1.4286 shares of CenturyLink stock for each Level 3 share they own, implying a purchase price of $66.50 per Level 3 share.

The purchase price represents a nearly 42 percent premium on Level 3's unaffected closing share price of $46.92 on October 26, 2016, the last trading day prior to market speculation about a potential transaction.

The combined company will create an enterprise player with about $19 billion in pro forma business revenue and $13 billion in business strategic revenue for the trailing twelve months ended June 30, 2016.

The transaction, subject to approval by CenturyLink and Level 3 shareholders, is expected to close by the end of third quarter 2017.

Upon closing of the transaction, CenturyLink shareholders will own about 51 percent of the combined company, while Level 3 shareholders will own the remaining 49 percent stake.

The combined company will be headquartered in Monroe, Louisiana, and maintain a significant presence in Colorado and the Denver metropolitan area.

The deal will increase CenturyLink's network by 200,000 route miles of fiber, which includes 64,000 route miles in 350 metropolitan areas and 33,000 subsea route miles connecting multiple continents.

Accounting for those served by both companies, CenturyLink's on-net buildings are expected to increase by nearly 75 percent to about 75,000, including 10,000 buildings in EMEA and Latin America.

After the close of the transaction, CenturyLink CEO and President Glen Post will continue to serve as CEO and President of the combined company, while Level 3's CFO Sunit Patel will serve as CFO of the combined company.

The Chairman of CenturyLink's Board at the time of closing of the transaction will continue to serve as chairman of the combined company.

CenturyLink has agreed to appoint four Level 3 Board members at closing, one of whom will be a representative of STT Crossing, a wholly owned subsidiary of ST Telemedia and holder of about 18 percent of Level 3's outstanding common stock. STT has agreed to vote its Level 3 shares in favor of the transaction.

CTL is trading at $27.31, down $3.08 or 10.13 percent on a volume of 15.88 million shares. LVLT is trading at $56.57, up $2.52 or 4.66 percent on a volume of 12.89 million shares.