Morgan Stanley Comments On LVLT / GLBC Merger

Morgan Stanley is commenting on the Level 3 Communications Inc. LVLT / Global Crossing Ltd. GLBC merger, which it says “underscores our view that consolidation makes sense for those assets with clear synergy potential.” “The transaction has appeared logical for some time given (1) the significant deleveraging effect for Level 3 (from 6.8x to 4.4x post-synergies on a Net Debt / Adj EBITDA basis), (2) potential price rationalization in the long-haul market, and (3) greater scale advantages (domestically and overseas),” Morgan Stanley writes. “The deal also increases Level 3's exposure to Enterprise revenues (from ~40% of 2010 Core Network Services revenue to 56% of revenues plus Global Crossing's Invest and Grow revenues), which should allow the company to benefit from stronger and more sustainable growth drivers in the future.” Level 3 Communications closed Monday at $1.70; Global Crossing closed at $24.97.