Mergers & Acquisitions

Mergers & Acquisitions

October 04, 2011

Level 3 Completes Acquisition of Global Crossing

During an October 4 press conference, Level 3 President and Chief Operating Officer Jeff Storey stated that the primary reason driving his company’s completion of its acquisition of Global Crossing (News - Alert) Limited was, “the combined entities’ commitment to the customer experience.” The combination’s ability to provide IP and converged data network (CDN) capabilities as Storey highlighted, “local to global to local” on a wholly-owned and operated fiber network certainly is distinctive.

 Deal details

As stated in the press release detailing the completion of the acquisition, “The transaction was structured as a tax-free, stock-for-stock exchange.”  The company also announced that it will:

  • Conduct its business on a worldwide basis using the Level 3 Communications (News - Alert) name
  • Transfer the listing of its common stock to the New York Stock Exchange (NYSE), and expects to begin trading on the NYSE on Oct. 20, 2011, under its current ticker symbol "LVLT” while trading on the NASDAQ Global Select Market until the transfer is completed
  • In conjunction with listing on NYSE, the company will implement a 1-for-15 reverse stock split of the Level 3 common stock.

Benefits of the transaction cited were:

  • Combination meets customers’ local, national and global communications needs
  • Combination provides service over 165,000 intercity, metro and subsea fiber route miles with presence in more than 45 countries
  • Pro Forma 2010 revenues of $6.2 billion and 2010 Adjusted EBITDA of $1.3 billion, $1.6 billion including expected synergies

“Our enterprise is now a global, state-of-the-art communications company that is substantially bigger and financially stronger, with an unrivaled IP/optical network and global reach, and an entrepreneurial culture singularly focused on the customer experience,” said James Q. Crowe, chief executive officer of Level 3. “We believe the rapidly evolving communications market represents an extraordinary opportunity for us, and we are well positioned to capitalize on it.”

As Sunit Patel, executive vice president and chief financial officer of Level 3, noted, “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 U.S. and international network expansions. We continue to feel good about our business for the remainder of the year, and have improved confidence around our synergy targets.”

Integration going well

During the press conference, Storey reiterated the themes that have dominated the promotion of the deal since it was first announced:

  • The combination is extremely complementary and positions the company to offer customers not just the access and reliability benefits of being able to go IP and CDN end-to-end, but also the savings from keeping their traffic on-net.
  • Keeping the number one objective as maintaining focus on providing an industry-leading customer experience.

On the latter, he emphasized that the customer experience meant not just how customers got the network performance they require, but also that throughout the integration process careful attention is being paid so that historic sales and support relationships are maintained and nurtured.

From an industry structure and completion perspective the most significant result of the completion of the transaction is the creation of an entity that has that can compete globally while providing the ability to act and respond locally, and that has the financial wherewithal to support businesses of all sizes.

For those of us with long industry memories, this is a reminder of the days when Sprint (News - Alert) (in its U.S. long-distance provider early days) used its clever “You Can Hear a Pin Drop” marketing campaign to distinguish itself. Enterprise communications managers, especially multi-nationals, have historically looked to service providers to give them the on-net reach they desire in order to assure their end users reliable and consistent capabilities, and the local support to make sure things like mean-time-to restoration and local link performance meet or exceed their requirements.  The point of the old Sprint ad was that end-to-end fiber was something to be valued and relied upon for a quality experience. The positioning of Level 3 as providing a quality fiber-based experience end-to-end around the world makes the new Level 3 a company to watch.

Peter Bernstein is a technology industry veteran, having worked in multiple capacities with several of the industry's biggest brands, including Avaya, Alcatel-Lucent (News - Alert), Telcordia, HP, Siemens, Nortel, France Telecom, and others, and having served on the Advisory Boards of 15 technology startups. To read more of Peter's work, please visit his columnist page.

Edited by Rich Steeves

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