DealBook: Level 3 to Buy Global Crossing in $3 Billion Deal

Level 3 Communications announced on Monday that it would buy Global Crossing in a transaction worth $3 billion.

The deal values Global Crossing at $23.04 a share — about 56 percent above the telecommunication company’s closing price on Friday. As part of the acquisition, Level 3 will also assume $1.1 billion of debt.

The deal would combine the two companies’ fiber-optic networks over three continents, offering data and voice connections to more than 70 countries.

The combined entity will create a company with revenue of $6.26 billion and earnings of $1.57 billion, after taking into account projected cost savings.

“This is a transformational combination that we believe will deliver significant value to the investors, customers and employees of both Level 3 and Global Crossing,” James Q. Crowe, chief executive of Level 3, said in a statement. “The complementary fit between the two companies’ networks, service portfolios and customers is compelling.”

Level 3 shares rose 12 percent in premarket trading. Global Crossing was up 59 percent.

Level 3 already has significant shareholder support. Singapore Technologies Telemedia, Global Crossing’s largest investor with a stake of about 60 percent, has agreed to vote in favor of the acquisition. Once the deal closes, ST Telemedia is to nominate directors to the board, relative to the size of its stake.

“This strategic combination is an important milestone for both Global Crossing and Level 3, and a value-creating proposition for all stakeholders,” Lee Theng Kiat, chief executive officer of Singapore Technologies Telemedia, said in a statement. “Going forward, we believe the combined strengths of the two companies will position it in a very favorable, competitive position to expand in the U.S. and compete globally.”

Singapore Technologies Telemedia bought the stake in Global Crossing out of bankruptcy in 2003. Once a high-flying network operator, Global Crossing stumbled in the aftermath of the dot-com bust, filing for chapter 11 in early 2002.

Level 3’s advisers included Bank of America Merrill Lynch, Citigroup and Morgan Stanley; Rothschild provided the fairness opinion; and Willkie Farr Gallagher was the legal adviser. Goldman Sachs advised Global Crossing, while Latham Watkins served as the company’s legal adviser. Singapore Technologies Telemedia worked with Credit Suisse Securities.

Article source: http://dealbook.nytimes.com/2011/04/11/level-3-to-buy-global-crossing-in-3-billion-deal/?partner=rss&emc=rss