A global network map of the new combined company of Level 3 and Global Crossing
(WEB HOST INDUSTRY REVIEW) –- Fiber-based communications services provider Level 3 Communications (www.level3.com) announced on Monday it will acquire rival Global Crossing (www.globalcrossing.com) in an all-stock deal valued at $3 billion, including $1.1 billion in net debt.
The deal is pending regulatory and shareholder approval and is expected to close by the end of 2011.
US-based Level 3 is offering 16 of its own shares for each Global Crossing share, equal to $23.04 per share at Level 3′s closing share price the day before the deal was announced.
According to the press release, the acquisition will create a “major global player in connectivity services.”
The combined company will have fiber networks on three continents, network infrastructure in over 50 countries, connections to more than 70 countries and extensive undersea cable capacity.
The acquisition will see the addition of Global Crossing’s network infrastructure in Europe and Latin America, connectivity to Asia and experience in managed corporate services.
“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,” says Jim Crowe, CEO of Level 3. “The complementary fit between the two companies’ networks, service portfolios and customers is compelling. By leveraging the respective strengths and extensive reach of both companies, we are creating a highly efficient and more extensive global platform that is well-positioned to meet the local and international needs of our customers.”
The deal between the two backbone providers is one that had previously been discussed many times throughout the last few years, according to Global Crossing CEO John Legere.
The combined company will meet the growing need for scale, as well as an evolving network topology and significant increase in global video and cloud computing traffic expected in the near future.
The deal will provide many benefits for Level 3, including improving its credit profile as well as significantly strengthen the company’s balance sheet, extend its portfolio of transport, IP and data solutions, content delivery, data center, colocation and voice services, and expand its sales expertise.
Level 3 expects the acquisition to bring in another $300 million to its annual EBITDA, with two-thirds of that realized within 18 months of closing.
As for long-term effects of the acquisition, the deal is estimated at $2.5 billion, while the one-time cost of integrating Global Crossing is put at $200 to $225 million.
The combined 2010 revenues of the new company is $6.26 billion and adjusted EBITDA of $1.27 billion before synergies.
Level 3 said the deal should also add to free cash flow by 2013, as well as improve its net debt to EBITDA ratio.
Level 3 has $1.75 billion in committed financing in place for the transaction, and ST Telemedia, Global Crossing’s largest shareholder with a 60 percent stake, has agreed to the deal.
For hosting providers that might be customers of both companies, this deal could (and probably will) impact their supplier relationships, just from a billing standpoint.
One interesting way this deal might impact host is in terms of carrier diversity. Even if nothing really changes about the network infrastructure being delivered, is there a point coming in the near future when what right now are separate connections to Level 3 and Global Crossing aren’t considered redundant, either practically or from a marketing standpoint?
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