CenturyLink and Level 3 Communications have announced that their Boards of Directors have unanimously approved a definitive merger agreement under which CenturyLink will acquire Level 3 in a cash and stock transaction valued at approximately US$34 billion, including the assumption of debt. Upon the closing of the transaction, CenturyLink shareholders will own approximately 51% and Level 3 shareholders will own approximately 49% of the combined company.
The combined company will have the ability to offer CenturyLink's larger enterprise customer base the benefits of Level 3's global footprint with a combined presence in more than 60 countries. In addition, the combined company will be positioned to further invest in the reach and speeds of its broadband infrastructure for small businesses and consumers.
"The digital economy relies on broadband connectivity, and together with Level 3 we will have one of the most robust fibre network and high-speed data services companies in the world," said Glen Post, CenturyLink CEO and President. "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 fibre 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 organisations and provide employees growth and advancement opportunities the companies could not offer separately."
"This is a compelling transaction for our customers, shareholders and employees," said Jeff Storey, President and CEO of Level 3. "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."
The transaction increases CenturyLink's network by 200,000 route miles of fibre, 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% to approximately 75,000. Overall, the complementary domestic and international networks will provide cost efficiencies by focusing capital investment on increasing capacity and extending the reach of the combined company's high-bandwidth fibre network.
The combined company will have significantly improved network capabilities, creating an enterprise player with approximately US$19 billion in pro forma business revenue and US$13 billion in business strategic revenue, for the trailing twelve months ended June 30, 2016. Together, CenturyLink's and Level 3's revenue will be 76% derived from business customers, and 65% of the combined company's core revenue will be from strategic services. Given the complementary nature of the portfolios, the combined company will offer an even broader range of services and solutions to meet customers' demand for more bandwidth and new applications in an increasingly complex operating environment.
The transaction will also provide the combined company with increased opportunity to invest in its broadband infrastructure and enhance broadband speed for small businesses and consumers.
After the close of the transaction, Post will continue to serve as CEO and President and Sunit Patel, Executive VP and CFO of Level 3 will serve as CFO of the combined company.
The Chairman of CenturyLink's Board at the time of the 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).
The combined company will be headquartered in Monroe, Louisiana in the US and will maintain a significant presence in Colorado and the Denver metropolitan area.
The companies anticipate closing the transaction by the end of third quarter 2017. The transaction is subject to regulatory approvals, including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, review by the US Federal Communications Commission, certain state regulatory approvals and other customary closing conditions. The transaction is also subject to the approval of CenturyLink and Level 3 shareholders.
CenturyLink has entered into a voting agreement with STT Crossing (a wholly owned subsidiary of Singapore Technologies [ST] Telemedia), holder of approximately 18% percent of Level 3's outstanding common stock, pursuant to which it will vote its Level 3 shares in favour of the transaction.
Interested?
Read the TechTrade Asia blog post about CenturyLink's focus on hybrid IT
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