The combined company will run a global services platform anchored by fibre-optic networks across three continents, with a customer base covering more than 50 countries and with connections to more than 70 countries. The new company aims to build on the strengths of both Level 3 and Global Crossing, offering a comprehensive portfolio of end-to-end data, video and voice solutions to customers from a range of backgrounds, including enterprise, government, wholesale, content and online.
Jim Crowe, CEO of Level 3, referred to the acquisition as a transformational combination for the business, saying: “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.”
Level 3’s acquisition will create a company with combined 2010 revenues of $6.26 billion, and 2010 adjusted EBITDA of $1.27 billion before synergies. The integration of the businesses is expected to create adjusted EBITDA synergies of approximately $300 million, with reduced capital expenditure of approximately $40 million a year. Of these savings, around 39% are from network expense savings, around 49% are from operating expense savings, and around 12% are from reductions in capital expenditures.
Under the declared terms of the agreement, the acquisition will be a tax-free, stock-for-stock transaction. Singapore Technologies Telemedia, Global Crossing’s largest shareholder, has welcomed the move, believing it will place the business in “a very favourable, competitive position to expand in the US and compete globally.”
The transaction is subject to regulatory approvals relating to competition law, licensing, financing and foreign ownership. It requires the approval of the US Department of Justice and other regulatory agencies in the US, as well as the approval of the stockholders of each companies. Nevertheless, the transaction is expected to close before the end of the year.
“We are committed to created a high-performing combined business through a carefully managed integration plan,” said Jeff Storey, president and COO of Level 3, explaining that the businesses plan to begin integration planning immediately.
