Centurylink, Level 3 Confirm $34 Billion Deal

Centurylink Inc CTL confirmed Monday it has reached an agreement in which it will acquire Level 3 Communications, Inc. LVLT in a cash and stock transaction that values the company at $34 billion or $66.50 per share.

The Wall Street Journal reported late last week the two companies were in advanced talks to merge. Similarly, Benzinga Pro reported in early July that Level 3 Communications was considering strategic alternatives, including a sale of itself.

CenturyLink will pay Level 3 shareholders $26.50 per share in cash and a fixed exchange ratio of 1.4286 shares of its own stock for each Level 3 share they own. The transaction's $66.50 per share valuation is based on Centurylink $28.00 per share reference price.

The deal represents a premium of approximately 42 percent based on Level 3's trading price of $46.92 on October 26 which was the last day of trading prior to market speculation of a pending transaction.

Centurylink's investors will now own approximately 51 percent of the combined company.

CenturyLink noted that the transaction will increase its network by 200,000 route miles of fiber and its on-net buildings are expected to increase by nearly 75 percent to approximately 75,000.

In addition, the combined scale of the two companies combined is expected to generate $975 million of annual run-rate cash synergies.

"The digital economy relies on broadband connectivity, and together with Level 3 we will have one of the most robust fiber network and high-speed data services companies in the world," said Glen Post, CenturyLink CEO and President. "This transaction furthers our commitment to providing our customers with the network to improve their lives and strengthen their businesses. It is this focus on providing fiber connectivity that will continue to distinguish CenturyLink from our competitors. CenturyLink shareholders will benefit from the significant synergies and financial flexibility provided by the combined company's revenue growth and strong cash flow. For employees, this combination will bring together two highly customer-focused organizations and provide employees growth and advancement opportunities the companies could not offer separately."

"This is a compelling transaction for our customers, shareholders and employees," said Jeff Storey, President and CEO of Level 3. "In addition to the substantial value delivered to shareholders, the combined company will be uniquely positioned to meet the evolving and global needs of enterprise customers."