The rumors of talks between CenturyLink and Level 3 were not just true, they were imminently true. The boards of both CenturyLink and Level 3 Communications have approved a merger agreement valued at $34B including debt assumed. The deal has the potential to dramatically shift the infrastructure playing field, and will take a while to process fully -- at least for me.
CenturyLink will be paying $26.50 per share in cash plus a fixed ratio of 1.4286 shares of its stock for that of Level 3, which works out to a purchase price of $66.50 per share. CenturyLink shareholders will own 51% of the combined company, and Level 3 shareholders will own the other 49%.
The combined company have some 75,000 on-net buildings around the world, with 10,000 of them in Europe and Latin America. It will have some $25B in revenue, with $13B of that being 'strategic' enterprise revenue. They will of course have those $10B or so of NOLs that Level 3 has been hanging onto to save money off the combined' company's tax bill. They expect to derive some $975M of annual synergies as well.
In terms of management, CenturyLink's Glen Post will stay on as CEO, while Level 3's Sunit Patel will hold down the CFO role. Four of Level 3's board members, including one from ST Telemedia's STT Crossing subsidiary, will be nominated to CenturyLink's board. The company's headquarters will be in Louisiana, while a major presence in Colorado will be maintained.
It will take a while for regulators to work through the deal, which will see the country's third-largest ILEC buy the largest competitive infrastructure provider. They expect to close the deal, assuming everything stays on track, in the third quarter of 2017.
I honestly didn't expect they'd go through with it, and I'm still figuring out what I think about the combination. More later on that, but add your two cents in the comments below.