With the end goal of becoming a worldwide provider of network services, Level 3 announced this morning that it plans to acquire Global Crossing for an estimated $3 billion in stock.
With a definitive agreement in hand, Level 3 will acquire Global Crossing in a tax-free, stock-for-stock transaction. Under the terms and subject to the conditions of the agreement, Global Crossing shareholders will receive 16 shares of Level 3 common stock for each share of Global Crossing common stock or preferred stock that is owned at closing.
Based on Level 3's closing stock price on Friday, the transaction is valued at $23.04 per Global Crossing common or preferred share, or approximately $3 billion, including the assumption of approximately $1.1 billion of net debt as of Dec. 31.
Level 3 and Global Crossing were rumored to be in negotiations over the past few years, but the deal didn't come to fruition until this morning's announcement. With Global Crossing's network assets, Level 3 will have fiber-optic networks on three continents that will be connected by undersea facilities. The combined network will serve a worldwide customer set with owned network in more than 50 countries and connections to more than 70 countries.
"This is a transformational combination that we believe will deliver significant value to the investors, customers and employees of both Level 3 and Global Crossing," said Jim Crowe, chief executive officer of Level 3. "The complementary fit between the two companies' networks, service portfolios and customers is compelling. By leveraging the respective strengths and extensive reach of both companies, we are creating a highly efficient and more extensive global platform that is well-positioned to meet the local and international needs of our customers."
The deal still needs to gain regulatory approval, but it's expected to close by the end of the year.
Level 3 said the transaction would create a company with pro forma combined 2010 revenues of $6.26 billion and pro forma combined 2010 adjusted EBITDA of $1.27 billion before synergies, and $1.57 billion after expected synergies.
Singapore Technologies Telemedia (ST Telemedia) has a 60 percent stake in Global Crossing and will become a "significant investor" in Level 3 once the Global Crossing acquisition is completed. ST Telemedia, which has already signed off on the agreement, will be able to appoint members to Level 3's board.