CenturyLink Continues to Consolidate

Includes: CTL
by: 451 Research: Inorganic Growth

By Brenon Daly

Just a year and a half after a multibillion-dollar consolidation move, CenturyLink (NYSE:CTL) was back at it on Thursday with another one twice the size. The telecom service provider announced that it is picking up Qwest Communications (Q) in a deal valued at $22.4bn ($10.6bn in equity plus the assumption of $11.8bn in net debt). The acquisition comes just 18 months after CenturyLink, which was then known as CenturyTel, acquired Embarq Holdings in a deal valued at $11.6bn on an enterprise value basis.

When we look at the two transactions, we can’t help but notice the fact that CenturyLink is paying exactly 1.8 times trailing sales (on an enterprise value basis) for both Qwest and Embarq. (Both deals were done in equity.) For the record, we would note that’s exactly half the multiple that CenturyLink garners on the public market – and that’s without a take-over premium.