Struggling networking services provider Genuity
is set to sell its assets to Level 3 Communications
in a deal said to be valued at $240 million.
While an official announcement is not expected until next week, there are rumblings the sale of Genuity’s assets will be done through a pre-packaged bankruptcy reorganization. Reports say the Chapter 11 filing has received the approval of Genuity’s creditors, clearing the way for the $240 million sale.
Talks between the Internet services companies were first reported by internetnews.com in early October. Since then, Genuity paid creditors millions of dollars for deadline extensions as details were hammered out.
The sale comes after a 2-year roller coaster ride for the Woburn, Mass., company. Formerly the Internet division of GTE Corp., Genuity spun out as part of GTE’s merger with Bell Atlantic, now VerizonCommunications
, in 2000.
Following the merger, Genuity spent millions of dollars on advertising and corporate sponsorship of golf tournaments and other events to raise the profile of the company and its Black Rocket service. It occupied expansive offices situated between Interstate 93 and Rte. 128.
But as large customers delayed or canceled orders for IT equipment and services, Genuity suffered. Then, this summer, Verizon decided not to reintegrate the company, leaving management searching for a survival strategy.
Enter Level 3. Sitting on a $500 million investment from Warren Buffett’s Berkshire Hathaway Group, the Broomfield, Colo., company was a logical buyer.
Level 3 CEO James Q. Crowe had publicly cited the “extraordinary opportunities” with the ongoing shakeout in the telecommunications industry, and said he looking for “acquisitions relating to industry consolidation.”
Analysts say the move makes sense. Both share AOL as a customer (in their managed modem bases) so there are potential synergies. Level 3 could also benefit by adding Genuity’s high-end managed hosting services.