Level 3 Communications, Inc. has announced that it has signed a definitive agreement to acquire Broadwing. Under the terms of the agreement, Level 3 will pay $8.18 of cash plus 1.3411 shares of Level 3 common stock for each share of Broadwing common stock outstanding at closing. In total, Level 3 currently expects to pay approximately $744 million of cash and issue approximately 122 million shares.
In October 2005, Level 3 purchased Tulsa-based WilTel Communications in a cash and stock deal valued at $680 million. WilTel operated a nationwide fiber with direct access in more than 700 locations.
Broadwing which is based in Austin, Texas, delivers data, voice and media solutions to enterprises and service providers over its 19,000 mile intercity fiber network. Approximately half of Broadwing’s revenue comes from the wholesale market, with business customers comprising the remaining revenue.
“The acquisition of Broadwing is consistent with both the Level 3 wholesale market strategy as well as our more recent entry into the enterprise market,” said James Q. Crowe, chief executive officer of Level 3. “We believe the combination of Level 3 and Broadwing will create value for our investors through the elimination of duplicative network and operating costs, the addition of a solid revenue base, and a further strengthening of our financial position.
As of June 30, 2006, Level 3 had approximately $1.4 billion of cash and marketable securities on hand as adjusted for the acquisitions of TelCove and Looking Glass, the sale of Software Spectrum and the redemption of its outstanding 9.125% Senior Notes due 2008 and 10.50% Senior Discount Notes due 2008.
Closing is subject to customary conditions, including receipt of applicable state and federal regulatory approvals, and is also subject to the approval of the stockholders of Broadwing. Closing is expected to occur in the first quarter of 2007.