"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.