The Post Marriage “Deets”
On Monday, June 16, Level 3 Communications agreed to buy TW Telecom, a business Internet connections provider, for approximately $5.6 billion. It’s no secret that they are not the first telecommunications company in the industry to “pop the question”! In 2014, it appears that several companies will be joining in marital bliss as they attempt to widen their product offerings. Comcast is buying out Time Warner Cable, AT&T is trying to take over DirectTV, and Sprint and T-Mobile USA are also seeking to merge.
Under this new merger, Level 3 has agreed to pay “$10 a share in cash and 0.7 of one of its shares for each TW Telecom Share.” This offer was about $40.86 a share, 12 percent above TW Telecom’s closing price on Friday. Level 3 will be scoring big by partnering with TW. TW is one of the largest providers of Internet access and online-based voice calling to businesses. Their fiber optic cables are used by well known companies, Google and Netflix. TW Telecom is based in Lone Tree, Colorado; and “reported $36.5 million in profits last year on $1.6 billion in revenue. Level 3 hopes to generate $240 million in cost savings, much of which will come from shaving network and operating expenses.”
As with any marriage, both companies have to combine the good and the bad—in this case the bad is a lovely $1.6 billion in debt! Don’t you just love starting out a marriage in debt?! We didn’t think so. Level 3 is likely not going to be toasting to that!
When Will They Officially Say “I do”?
Rumor has it that the deal will be closed by year end. Jeff Storey, Chief Executive at Level 3, said in a recent statement, “We believe this is a financially compelling and very strategic acquisition for Level 3 that will enhance our ability to continue to gain market share.” This marriage between Level 3 and TW Telecom will further solidify Level 3’s position in the telecommunication industry, as a premier global communications provider to the enterprise, government, and carrier market. TW and Level 3 together create a true “power couple” as they look forward to the future and seek to combine “Level 3’s global assets and capabilities with TW’s extensive local operations and assets in North America.”
