Level 3 falls as Street dissects TW Telecom deal

"TWTC has a very dense fiber metro base, and I think combined with LVLT domestic and international long-haul routes, the company will be able to deliver a new level of fiber connectivity around the world," says Stephens' Barry McCarver, offering an upbeat view of the Level 3 (LVLT -4.1%)/TW Telecom (TWTC +7.3%) deal.

But others on the Street weren't as thrilled about the price, which at announcement time represented a 26% premium to where TW closed on Thursday, before a BrightWire report about Level 3's interest arrived.

Light Reading's Carol Wilson notes the deal significantly boosts Level 3's enterprise/Ethernet reach, and that TW has a stellar reputation. "Twice in the past year I've had executives from tw telecom competitors volunteer the fact that they purposely avoid going head-to-head with that particular service provider."

Level 3 is offering $10 in cash and 0.7 shares for each TW share. The company has already lined up $3B in financing; it had $7.8B in net debt at the end of Q1.

Level 3 expects $240M/year in cost synergies ($200M adjusted EBITDA, $40M capex), and sees $170M in integration costs. TW shareholders will own 29% of the merged company. TW CEO Larissa Herda will be stepping down once the deal closes in Q4.

Comments (2)
  • DeepValueLover
    , contributor
    Comments (11388) | Send Message
    (LVLT) had so much potential.


    I feel bad for those who held on or bought more when it touched $100.
    16 Jun 2014, 08:15 PM Reply Like
  • otis of moab
    , contributor
    Comments (4) | Send Message
    17 Jun 2014, 08:40 AM Reply Like
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