Level 3 buying Global Crossing for $2 bln

Level 3 Logo

Everyday Internet users are primarily concerned with bandwidth to their homes, offices, or whatever mobile devices they might be carrying at the moment, but a device’s link is just one step in a much broader—and very complicated—inter-related set of networks that carry Internet traffic around the world. Today, that world got a little less complicated—or at least it’s going to have one less name to remember. Top-tier network operator Level 3 has announced it will be acquiring tier 1 network operator Global Crossing in an all-stock deal worth about $2 billion. The combined networks will own network operations in some 50 countries and offer connectivity to more than 70 countries, in no small part due to undersea fiber optic cables that span three continents.

“This is a transformational combination that we believe will deliver significant value to the investors, customers and employees of both Level 3 and Global Crossing,” said Level 3 CEO Jim Crowe, in a statement. “By leveraging the respective strengths and extensive reach of both companies, we are creating a highly efficient and more extensive global platform that is well-positioned to meet the local and international needs of our customers.”

The deal will see Global Crossing shareholders get 16 shares of Level 3 common stock for each share of Global Crossing stock they hold. Level 3 will also assume some $1.1 billion in debt carried by Global Crossing.

Global Crossing has been around for a while: technically headquartered in Bermuda, the company saw serious growth as it was building out its fiber backbone in the 1990s—and scored high-profile deals with the likes of Disney—but was a victim of the wider dot-com failure and found itself declaring bankruptcy in 2002. However, all that undersea fiber was valuable, and the company emerged restructured in 2003 with a new emphasis on enterprise and corporate customers rather than selling wholesale access to its network.

The acquisition will enable Level 3 to significantly increase its profile as a global top-tier backbone Internet operator, and expand its operations and services to encompass a number of enterprise operations. Although there weill be $200 to $225 million in up-front costs associated with the acquisition, Level 3 expects to start making money off the deal in 2013.

The acquisition is subject to regulatory approval by a number of U.S. agencies as well as agencies in other countries were Level 3 and Global Crossing conduct operations. However, the company expects the deal to close by the end of the year.


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