Level 3 Closes Global Crossing Deal, Plans Reverse Stock Spit

October 4th, 2011 by · 10 Comments

Just a week shy of the 6 month anniversary of the original announcement, Level 3 has closed its purchase of Global Crossing. The combined company had $6.2B in revenue and $1.3B in EBITDA pro forma (before synergies) for 2010, and they still anticipate $300M in opex savings from synergies. It will have 165,000 route miles of fiber, 30,000 being in the metro, and a presence in 45 countries.

The company intends to operate in three segments, North America, Latin America, and EMEA. In other words, some back of the envelope estimation says that GC Impsat will be left mostly alone and contributes something in the neighborhood of $600M in revenue. GCUK will be merged together with Level 3's European business plus Global Crossing's continental European business and probably add up to $900M in revenue. And the rest, $4.7B or so, will come from North America.

Level 3 also finally made its reverse split move, after several years of keeping the possibility in their back pocket. The company will be moving to the NYSE on October 20, and will implement a 1 for 15 stock split at the same time. Nobody likes reverse splits, but if there is a good time to have one then it is during a transformational acquisition.  After the split, yesterday's $1.41 close translates to a stock price of $21.15.  That will take some getting used to.

As part of the closing, Level 3 will be paying off $1.35B of Global Crossing's debt, including the $430M of GCUK notes, in early November. Level 3 managed to raise all the money they need for that refinancing and then some over the summer at attractive rates.

While there were some regulatory hoops to jump through, the timing of this close was pretty routine - it neither took until the end of the year nor did they breeze through it in three months.  Now the hard work begins though.  The integration seems likely to be much smoother than the ones that tripped up the company in 2007-2008, as it is primarily backbone assets that overlap - and known ones at that.  Global Crossing's US backbone is built mainly on 24 fibers on the original Qwest buildout, which is the same as that of Genuity which Level 3 bought back in 2003.

Still on tap this month will be Level 3's Q3 earnings report, which I'm guessing will be a bit later than usual due to all the other stuff going on.  But those numbers will be pre-GLBC, so the only question is what sort of growth momentum they entered the integration with.

Categories: Financials · Internet Backbones · Mergers and Acquisitions

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10 Comments So Far


  • Papa says:

    They will need a track shoe on one foot and a boot on the other. The need will be quick agility -able to maneuver – and the willingness to trudge through the hard work at the same time. With Crowe and Storey, I think it can be done. The trick will be to sustain NA while supporting the growth in SA and Europe.

  • Beer-batter says:

    The painful side of the synergies is that L3 now has nearly 11,000 employees, double of what they had yesterday. It’s unfortunate, that for how much this deal makes sense, it will likely come at the expense of several quality people (likely the redundant GLBC folks) losing their jobs very soon.
    I wonder what their target is for total workforce and when they will begin to layoff employees?

  • SHELL GAME says:

    Merry Christmas?? Level 3’s new shell game won’t work either. Moving to the NYSE with a 15:1 stock split. Is nothing more than a hide and seek game. In 60 months it will be down another 77% just like the previous 60 months. Oh, BTW 2k people will be out of work by Christmas.

  • Carlk says:

    Hmm, I don’t know how bad things will be in 60 months, but as bad as we are told things are today, things aren’t too bad at Level 3.

    It’s never fun to see decent people finding pink slips from any organization, but business principles must prevail across all walks of life because that’s how a capitalistic system functions while advancing humans to “The Next Level.”

    http://finance.yahoo.com/news/Level-3-says-to-cut-hundreds-rb-1345202394.html?x=0&.v=1

    NO DOWNTURN

    Level 3 said it is not seeing any effect of the economic slowdown that is putting pressure on the United States and Europe.

    “If we didn’t read the newspapers or watch TV, we wouldn’t know that there is a financial problem at the moment,” Crowe said.

    “Other non-At&T, non-Verizon companies are saying the same thing: business is fine.”

    Level 3 shares were up 4 percent at $1.47 in afternoon trade on the Nasdaq.

    (Reporting by Supantha Mukherjee in New York; Editing by Steve Orlofsky)

    http://www.level3.com/

  • Anonymous says:

    Well whatever depts they layoff from GLBC, they should get the GLBC HR Dept to perform it, I think they have more skills and experience in this area than the LVLT HR dept 🙂 I agree a lot of people gone by Christmas

  • 15% Downturn says:

    The talking head and the data say two totally differnet things.

    Look at the income statement. Level 3’s revenues dropped from $2.49B – $2.16B over the last two years or 15%? A loss if $300M in annual revenue is not a downturn?

    People who don’t have shareholders to appease wouldn’t make that statement.

    I know I wouldn’t say I am immune to the economic issues after taking a 15% pay cut.

    What would those numbers look like if the M&A revenues were eliminated and we only looked at the organic growth or lack thereof? 20%? 25%?

    They need their immunization shots updated.

    • Anonymous says:

      I believe that several Level 3 Employees need to re-review the “Policies and Code of Ethics” in regard to “Blogs/ Blogging”, prior to submitting any further comments on this site.

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