Level 3 Communications has agreed to buy Global Crossing in an all-stock deal valuing Global Crossing at USD 3.0 billion, including USD 1.1 billion in net debt. US-based Level 3 is offering 16 of its own shares for each Global Crossing share, equal to USD 23.04 per share at Level 3's closing share price the day before the deal was announced. The deal creates a major global player in connectivity services, with fibre networks on three continents, network infrastructure in over 50 countries, connections to more than 70 countries and extensive undersea cable capacity. Level 3 will gain from Global Crossing's network infrastructure in Europe and Latin America, connectivity to Asia and experience in managed corporate services. Level 3 expects synergies from the takeover to add USD 300 million to annual EBITDA, with two-thirds of that realised within 18 months of closing. Total long-term synergies from the deal are estimated at USD 2.5 billion, while the one-time cost of integrating Global Crossing is put at USD 200-225 million. The transaction will create a company with pro forma combined 2010 revenues of USD 6.26 billion and adjusted EBITDA of USD 1.27 billion before synergies. Level 3 said the deal should add to free cash flow by 2013, as well as improve its net debt to EBITDA ratio to a pro forma 4.4x as of end-2010, versus 6.8x previously. Level 3 has USD 1.75 billion in committed financing in place for the transaction, and ST Telemedia, Global Crossing's largest shareholder with a 60 percent stake, has agreed to vote in favour of the deal. ST Telemedia will get representation on Level 3's board and has agreed to a standstill in its holding in the company. Pending regulatory and shareholder approval, the takeover is expected to close by the end of 2011.
