By Lauren Pollock
Level 3 Communications Inc. agreed to buy business ethernet
provider TW Telecom for about $5.7 billion in cash and stock.
The deal values tw telecom at $40.86 a share, a 12% premium to
Friday's close. Shareholders will receive $10 cash and 0.7 share of
Level 3 for each share of TW Telecom.
TW Telecom shares were halted premarket, while Level 3 rose 4.3%
to $46.
Level 3 Chief Executive Jeff Storey pointed to TW Telecom's
extensive local operations, which he said will complement Level 3's
global assets and capabilities. Level 3 operates network and data
centers in more than 60 countries and has global subsea
networks.
The companies valued the deal at about $7.3 billion, which
includes the assumption of about $1.6 billion in debt, and said TW
Telecom shareholders will own about 27% of the combined company on
a diluted basis.
Originally a joint venture of Time Warner Inc. and U.S. West
started in 1993, TW Telecom made its public trading debut in 1999
as Time Warner Telecom Inc.
The company had been considered a takeover candidate, owing to
its strength in the data space--a key growth area as customers
increase their use of mobile devices.
Communications services company Level 3 gradually has pared its
losses since its 2011 acquisition of fellow long-haul Internet
service provider Global Crossing burdened it with higher costs and
slower-than-expected revenue growth.
At Friday's close, Level 3's market value was $10.5 billion,
while TW Telecom's was $5 billion.
For the 12 months ending March 31, the combined company had
adjusted revenue of $7.9 billion and adjusted earnings of $2.2
billion. The deal is expected to create annual synergies of about
$240 million.
The companies are both based in Colorado with Level 3 in
Bloomfield and TW Telecom in Littleton.
Write to Lauren Pollock at lauren.pollock@wsj.com
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