BY SUPANTHA MUKHERJEE AND AURINDOM MUKHERJEE
“It’s a fair price for TWTC shareholders, certainly the highest multiple the stock has seen,” Stephens Inc analyst Barry McCarver told Reuters.
Level 3 shareholders would own 71 percent of the combined company and tw telecom shareholders the rest.
Metropolitan fiber networks are seeing rapid growth as customers, which include telecommunication carriers and companies in various sectors, transfer more data, voice, video, and Internet traffic across their networks.
“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,” McCarver said.
On a conference call, tw telecom Chief Executive Larissa Herda said she would step down after the deal.
Tw telecom, founded in 1993 as a joint venture between US West and Time Warner, is one of the largest business ethernet providers in the United States. It connects more than 20,000 commercial buildings to its fiber network.
The combined company would have presence in 35,000 locations, Level 3 CEO Jeffrey Storey said on the call.
Level 3 operates and leases out fiber-optic communications networks to telecom carriers for voice and data communication and connects more than 60 countries.
“We still will be much smaller than our primary competitors, the incumbent telcos, but we will have the scope and scale to compete in a consolidating industry,” Storey said.
Tw telecom and Level 3 compete with CenturyLink Inc, AT&T Inc and Verizon Communications Inc in the United States.
A combined Level 3 and tw telecom was bad news for incumbent telecom companies such as AT&T, Verizon and CenturyLink who would now have a peer taking a share of the enterprise space, D.A. Davidson and Co analyst Donna Jaegers said.
Citi and BofA Merrill Lynch acted as financial advisers to Level 3. Evercore was tw telecom’s financial adviser.
Level 3 shares, which have doubled in value in the last 12 months, were down 5.7 percent at $41.59 in afternoon trading on the New York Stock Exchange. Tw telecom shares were up 7.3 percent at $38.98. (Reuters)