Level 3 Continues to Wheel and Deal with Broadwing Acquisition

Level 3 Communications (News - Alert) agreed to acquire optical network service provider Broadwing (News - Alert) for an aggregate purchase price of approximately $1.4 billion in cash and stock, the companies announced on Tuesday.

But despite all of its M&A dealings, Level 3 officials believe they won’t have any difficulties absorbing its latest acquisition. In May, Level 3 capped off a string of acquisitions with the $1.24 billion acquisition of CLEC TelCove. That deal comes on the heels of Internet backbone provider’s billion-dollar shopping spree when it absorbed WilTel and its Vyvx subsidiary for nearly $700 million last year and Progress Telecom (News - Alert) - ) for roughly $150 million as well as ICG for $163 million already this year.

“We have completed the majority of integration efforts from our WilTel acquisition under budget and ahead of schedule. The integration activities for our more recent acquisitions are also on plan,” said Kevin O'Hara, president and chief operating officer of Level 3.

Under the terms of the latest agreement, Level 3 will pay $8.18 of cash plus 1.3411 shares of Level 3 common stock for each share of Broadwing. In total, Level 3 currently expects to pay approximately $744 million of cash and issue approximately 122 million shares.

Broadwing, based in Austin, Texas , delivers data, voice and media solutions to enterprises and service providers over its 19,000 mile intercity fiber network. Approximately half of Broadwing's revenue comes from the wholesale market, with business customers comprising the remaining revenue.

“The acquisition of Broadwing is consistent with both the Level 3 wholesale market strategy as well as our more recent entry into the enterprise market,” said James Q. Crowe, chief executive officer of Level 3. “We believe the combination of Level 3 and Broadwing will create value for our investors through the elimination of duplicative network and operating costs, the addition of a solid revenue base, and a further strengthening of our financial position.

“Broadwing has made great strides with national enterprise customers as a result of their strong product portfolio and national sales teams. This creates an exciting opportunity for us to leverage both of these capabilities to accelerate the growth of Level 3's Business Markets Group.”

Closing is subject to customary conditions, including receipt of applicable state and federal regulatory approvals, and is also subject to the approval of the stockholders of Broadwing. Closing is expected to occur in the first quarter of 2007.

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Robert Liu is Executive Editor at TMCnet. Previously, he was Executive Editor at Jupitermedia and has also written for CNN, A&E, Dow Jones and Bloomberg. For more articles, please visit Robert Liu's columnist page.

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