Global Crossing Agrees to Level 3 Communications’ Acquisition Bid

New movement in mergers and acquisitions in the telecom space has emerged as Global Crossing, a provider of telecom services to enterprises, government and telecom carriers, has announced an agreement to be acquired by Level 3 Communications Inc.

Level 3 will take ownership of Global Crossing for stock shares valued at $23.04 per share. The terms of the agreement dictate that Level 3 will issue 16 of its shares for each share of Global Crossing. The deal price is a 56 percent premium to GLBC’s closing price on Friday of $14.80.

The two companies said in a joint statement on Monday that the deal value is $3 billion, which includes Level 3’s assumption of $1.1 billion of Global Crossing’s net debt.

According to Level 3 Chief Executive Jim Crowe in a statement, the fit between the two companies’ networks, services portfolios and customers has proven to be compelling. Level 3 is a provider of fiber-based communications services.

The companies also said that ST Telemedia, which holds 60 percent of Global Crossing, has agreed to vote for the offer, subject to certain conditions.

A report in the Wall Street Journal shows the companies’ combined network will serve a customer set with owned networks in more than 50 countries and connections to more than 70 countries. The deal is expected to generate synergies from network expense savings, operating expense savings and reductions in overall capital spending.

The deal gives all Global Crossing equity holders 16 Level 3 shares for each of their common or preferred shares. With Global Crossing valued at $23.04 per share that makes for a 56 percent premium based on Level 3’s close Friday at $1.44.

According to Level 3 officials, the company adopted a shareholder rights plan designed to protect its federal net operating losses. The plan is expected to deter trading that would cause an ownership change that could hurt the company’s ability to use the tax assets. The deal brings the company significantly closer to such an ownership change.

For the past two years, Level 3 has posted straight quarterly losses as many businesses put their Internet- networking services spending plans on hold. Some analysts predict that business spending on tech is picking up again.

Susan J. Campbell is a contributing editor for TMCnet and has also written for eastbiz.com.

  • Written by Susan J. Campbell
  • Edited by Janice McDuffee
  • www.tmcnet.com

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