Level 3 Acquiring Global Crossing for $3 Billion
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Level 3 Communications, Inc. (NASDAQ: LVLT) announced today its' intention to acquire Global Crossing Limited (NASDAQ: GLBC). The deal is valued at approximately $3 billion and will create a new network services platform that spans the globe.
The acquisition is a stock-for-stock transaction with Global Crossing shareholders receiving 16, Level 3 common stock shares for each Global Crossing common share. Pending regulatory approvals, the deal is set to close by the end of 2011. The stock swap component of the deal is valued at approximately $1.9 billion and Level 3 will also be assuming $1.1 billion worth of Global Crossing debt as part of the transaction.
Jim Crowe, CEO of Level 3 commented during a conference call announcing the deal, that anyone building a network with the kind of capital intensity that goes into metro and global assets, wants to get as large a return from as many diverse sources of customers and services as they possibly can.
"Simply put, you don't build metro networks just to serve medium and small enterprises, you want to serve wholesale, content, large enterprise, government, wireless and wired broadband," Crowe said. "It is one of the major strengths of this transaction that we will have substantial access to literally all customer segments."
The combination of Global Crossing and Level 3 will create a network that will be connected by a global subsea network that includes 100,000 intercity and 30,000 metro routes on three continents. John Legere, CEO of Global Crossing said during that call that Level 3's network fits 'hand in glove' with Global Crossing's footprint.
"Together we'll be able to meet the national and international needs of our customers far better than ever before," Legere said. "When combined, these next generation networks will deliver more than 10 Terabits of IP traffic around the globe."
Aside from the improved global footprint, the deal is also seen as way to create new operational synergies.
"When this is done, we don't take all the Global Crossing traffic and put in on Level 3," Crowe said. "The engineers will get together to figure out what is the best combination of assets to have the lowest possible cost and the highest level of customer service."
Crowe added that there will be a number of areas the that will be looked at and subsea network transport is a good example.
"Global Crossing has an enormous subsea footprint with a large organization and we're looking forward to getting a lot more efficiency under the sea," Crowe said.
It's not yet entirely clear how many jobs may be consolidated as part of the combined company either.
"We have two companies that are roughly the same size in terms of employee base and have worked through the tech bubble collapse, the financial services collapse and difficult times," Crowe said. "They've come through with strength and capability and you don't do that without excellent people."
Crowe noted that he has no intention on cutting the sales force and is likely to add more salespeople. He added that Level 3 will be working during the time before closing on the best possible organization and more information will be provided over time as decisions are made.
"This is an acquisition that from my perspective is a game changer," Crowe said. "I say that without exaggeration, I think it's a transformational transaction for both of the companies."