US-based fibre-based infrastructure provider Level 3 Communications has completed its US$3bn acquisition of IP solutions provider Global Crossing.
In a statement on 4 October, Level 3 said that it will now be transferring its stock listing from the…
US-based fibre-based infrastructure provider Level 3 Communications has completed its US$3bn acquisition of IP solutions provider Global Crossing.
In a statement on 4 October, Level 3 said that it will now be transferring its stock listing from the Nasdaq to the NYSE. It will also conduct a 1-for-15 reverse stock split, a move which has already been approved by shareholders.
The combined business had pro forma 2010 revenues of US$6.2bn and expects total synergies of up to US$300m of run-rate EBITDA.
The transaction will reduce its financial leverage from 6.8x net debt to adjusted pro forma EBITDA to 4.4x, the company said.
As a part of the deal, Level 3 will be redeeming and discharging US$1.35bn of Global Crossing’s outstanding debt. US$430m of senior secured due 2014 from Global Crossing’s UK subsidiary will be redeemed on 3 November.
Level 3 CFO Sunit Patel said in a statement: “As a result of potential revenue growth and synergies, over the longer term, we expect to have significant Free Cash Flow available for investment in high-return opportunities, including US and international network expansions.”
Speaking to SatelliteFinance, Patel said: “The nature of the opportunities we are talking about relates to extending our network in the US, Latin America and in Europe.”
Patel asserted that “the most important thing” about the Global Crossing deal was how it makes the business more international. He said that 30% of revenues would now come from outside the US.
On the issue of the reverse stock split, Patel said that Level 3 had been contemplating such a move for a number of years, but they wanted it to take place at a juncture where the company’s momentum was “clear and positive”.
He said that, for most investors, the reverse stock split was a “non-economic event”, but added that the new stock price could appeal to a wider range of investors.
Level 3 made a net loss of US$181m in the three months ending on 30 June, a deeper loss than the US$169m net loss in Q2 2010.
Yet Patel argued that the Global Crossing deal would accelerate Level 3’s move into profit.
“Unquestionably, the combination with Global Crossing and the synergies it creates pushes in by several years when we will be net income positive.”
Under the terms of the agreement originally announced in April, Global Crossing shareholders are receiving 16 Level 3 shares for each of their Global Crossing shares.
The deal was valued at US$3bn, including US$1.1bn of Global Crossing’s debt.
Level 3’s advisers for the deal were BoA Merrill Lynch, Citigroup and Morgan Stanley, while Rothschild also offered a fairness opinion.
Level 3’s legal adviser was Wilkie Farr & Gallagher.
Global Crossing’s financial adviser was Goldman Sachs. Its legal adviser was Latham & Watkins.
In order to secure the acquisition, Level 3 received US$1.75bn of committed financing from BoA Merrill Lynch and Citigroup, which included a US$1.1bn bridge loan.
Level 3 subsequently made a US$1.2bn bond offering in order to refinance this bridge loan. The proceeds from this offering had been placed in an escrow account until the completion of the deal.
