IP-based communications solutions provider Level 3 Communications has struck a deal to acquire ISPÂ TW Telecom in a deal with an enterprise value of US$7.3bn.
Level 3 is offering TW shareholders US$10 in cash and 0.7 of Level 3 common stock for each of…
IP-based communications solutions provider Level 3 Communications has struck a deal to acquire ISPÂ TW Telecom in a deal with an enterprise value of US$7.3bn.
Level 3 is offering TW shareholders US$10 in cash and 0.7 of Level 3 common stock for each of their shares in TW, which equates to US$40.86 per share – a 12.4% premium on TW’s last closing price of US$36.34.
There is no collar on the deal and Level 3 said TW Telecom shareholders will end up with approximately 29% of the combined business.
Level 3 said it has US$3bn in committed financing in place to part-fund the deal, without disclosing further details. It is buying TW for US$5.7bn and taking on its US$1.6bn debt pile.
The merger creates a company with a total enterprise value of US$25bn which would have had pro forma revenue of US$7.9bn for 2013 and adjusted EBITDA of US$2.2bn before synergies.
The companies estimate that the deal will generate US$240m in annualised synergies. They will begin the planning process for the integration immediately, which will be executed by a team selected from both companies.
Level 3 will gain TW’s metropolitan footprint and buildings connected to the network and TW’s customers will benefit from Level 3’s extensive local-to-global footprint, the companies said.
Speaking on a joint conference call today, TW CEO Larissa Herda said that the companies – both based on the outskirts of Denver, Colorado – had been considering the tie-up for a very long time.
Jeff Storey, president and CEO of Level 3, commented: “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.”
“The transaction further solidifies Level 3’s position as a premier global communications provider to the enterprise, government and carrier market, combining TW Telecom’s extensive local operations and assets in North America with Level 3’s global assets and capabilities.”
Level 3 owns networks and data centres in more than 60 countries and has significant global subsea networks. It provides local, national and global communications services to enterprise, government and carrier customers.
TW offers managed services, including business ethernet, converged and IP VPN solutions for enterprises throughout the US and across the globe.
The merger will need to be approved by the Federal Communications Commission, the Department of Justice and a number of US states, although the companies don’t anticipate any issues and expect the merger to close in four to six months time. STT Crossing, which owns 23% of Level 3’s outstanding stock, has already endorsed the deal.
Citi and BofA Merrill Lynch acted as financial advisors to Level 3 and Rothschild provided a fairness opinion. Willkie Farr & Gallagher acted as legal counsel to Level 3.
Evercore acted as financial adviser to TW and provided a fairness opinion. Wachtell, Lipton, Rosen & Katz acted as legal counsel to TW. Credit Suisse acted as financial adviser to STT.
