Network rivals merging in $25 billion deal
CenturyLink on Monday agreed to merge with Level 3 Communications in a $25 billion deal that would create one of the largest communications providers for businesses.
The combined company would have about 500,000 route miles of fiber that carry broadband, video and voice that enable corporations to communicate. It would also produce about $19 billion in annual revenue on a pro forma basis.
CenturyLink’s shareholders will own 51 percent of the combined company, while Level 3’s will hold the rest.
Both companies have struggled against larger competitors — AT&T and Verizon Communications — in the business services market. Investors sent CenturyLink shares down 12 percent to close at $26.58 Monday amid concerns that the company is overpaying and piling on debt to acquire a company whose sales growth has stagnated in a hotly competitive market. Level 3 rose almost 4 percent to $56.15.
“This transaction furthers our commitment to providing our customers with the network to improve their lives and strengthen their businesses,” Glen F. Post III, CenturyLink’s chief executive and president, said in a statement. “It is this focus on providing fiber connectivity that will continue to distinguish CenturyLink from our competitors.”
Post would continue to serve in his executive role of the combined company.
The combined company would be based in Monroe, La., where CenturyLink was founded in 1968.
However, they plan to keep a “significant presence” in Denver area, where Level 3 has its headquarters.
CenturyLink has grown from a small Louisiana phone provider by scooping up the former Qwest and Sprint Corp.’s landlines.
CenturyLink has received financing commitments from Bank of America Merrill Lynch and Morgan Stanley for $10.2 billion.
The deal “would not face undue hurdles” in winning regulatory approval, analysts at MoffettNathanson said in a note.
The transaction needs clearance from antitrust authorities and from the Federal Communications Commission, the companies said in the statement. The companies expect to complete the transaction by the end of September of next year.
In the first half of the year, Level 3 was the second-biggest U.S. provider of ethernet services, which run high-bandwidth internet connections for companies, trailing only AT&T, according to Vertical Systems Group.
CenturyLink was fifth on the list.