The merger includes Centurylink acquiring Level 3 even though the two companies have similar market capitalizations, and is a combination cash/stock deal. CTL will pay LVLT shareholders $26.50 per share in cash and a fixed exchange ratio of 1.4286 shares of CenturyLink stock for each Level 3 share they own. That means the total price is $66.50 per Level 3 share, which is a big 42% premium over LVLT’s share price prior to rumors of the announcement last week.
Once completed, current Centurylink shareholders will own 51% of the new company, with Level 3 shareholders owning the remaining 49%.
The new company will be headquartered in Centurylink’s home base of Monroe, Louisiana, but will “maintain a significant presence” in Level 3’s region of Colorado and the Denver metro area.
CTL commented via press release:
“The digital economy relies on broadband connectivity, and together with Level 3 we will have one of the most robust fiber network and high-speed data services companies in the world,” said Glen Post, CenturyLink Chief Executive Officer and President. “This transaction furthers our commitment to providing our customers with the network to improve their lives and strengthen their businesses. It is this focus on providing fiber connectivity that will continue to distinguish CenturyLink from our competitors. CenturyLink shareholders will benefit from the significant synergies and financial flexibility provided by the combined company’s revenue growth and strong cash flow. For employees, this combination will bring together two highly customer-focused organizations and provide employees growth and advancement opportunities the companies could not offer separately.”
The Wall Street Journal had first reported rumors of the tie-up late last week.
Level 3 shares rose $6.25 (+11.56%) to $60.30 in premarket trading Monday on the news. Prior to the merger announcement, LVLT had fallen 0.57% year-to-date.
Meanwhile, Centurylink shares were unchanged in premarket trading. Prior to the merger, CTL had gained 20.79% since the start of 2016.