A week after AT&T made headlines with its $85.4 billion plan to purchase Time Warner, regional telecommunications carrier CenturyLink announced Monday that it had signed an agreement to acquire Level 3 Communications, one of the world’s largest providers of Internet backbone services, in a cash, stock and debt transaction valued at $34 billion.
Monroe, Louisiana-based CenturyLink has ascended in recent years to the rank of the nation’s third-largest provider of fixed wireline network services. Monday’s deal would position the merged entity as the second-largest provider of business communications services in the U.S. behind market leader AT&T. The transaction would also give CenturyLink a significant market presence beyond the U.S. for the first time, owing to the acquisition of Level 3 assets that include 200,000 route miles of fiber optic network lines spanning commercial buildings and other locations in Latin America, Europe, the Middle East and Africa. Post-merger, CenturyLink is expected to derive approximately 76% of its revenue (totaling about $19 billion on a pro forma basis) from business customers within the U.S. and internationally.
Under the terms of Monday’s deal, Level 3 stockholders will receive a cash payment of $26.50 plus 1.4286 shares of CenturyLink stock for every Level 3 share, representing a 49% premium over Level 3’s closing share price as of Wednesday, October 26. CenturyLink will also assume more than $9 billion in Level 3 debt. At closing, CenturyLink shareholders will own 51% of the combined entity, which will be headquartered in Louisiana but will retain what executives termed as a “significant presence” in Denver, Colorado, where Level 3 is now based.
Contingent upon receipt of shareholder, FCC and other required approvals, the parties expect to complete the transaction during the third quarter of 2017. Emphasizing that “the digital economy relies on broadband connectivity,” Glen Post—the CEO of CenturyLink who is slated to assume the same role in the post-merger company—proclaimed: “with Level 3, we will have one of the most robust fiber network and high-speed data service companies in the world.”