Boston, MA 06/17/2014 (wallstreetpr) – Internet service provider, TW Telecom Inc. (NASDAQ:TWTC), is set to be acquired by Telecommunications Service Company Level 3 for $40.86 a share. Level 3 through its share purchase price, values TW Telecom at $5.64 billion and plans to use the company to expand its commercial fiber network in the U.S. The purchase price represents a 12% premium as of Friday closing price of $36.34.
Level 3 to Absorb $1.6 Billion in Debt
Terms of the deal will involve TW Telecom stockholders getting $10 in cash and 0.7 share of level 3. Taking into consideration TW Telecom’s net debt of $1.6 billion the deal could reach highs of $7.3 billion. TW Telecom mainly provides phone and data services to business and customers and internet access. The transaction will essentially allow Level 3 to own more network capacity in cities with high traffic giving it more control over pricing.
Since the beginning of the year, TW Telecom Inc. (NASDAQ:TWTC) has gained 19% including a 12% jump on June 13 when reports emerged level 3 had intensified talks over a possible takeover. The transaction now awaits approval from shareholders of both companies set for full closure in the fourth quarter. Level 3 has already committed $3 billion for financing the deal.
Merger to Result in $240 Million in Annual Savings
The companies expect the merger to enable higher quality and more reliable internet service for businesses and customers across North America. The transaction is also expected to result in $240 million in annual savings including $40 million from capital expenses. The deal also solidifies Level 3’s position as a global communications provider to enterprises, government and the carrier market.
The combined company could have resulted in about $114 million in net income and $7.9 billion in revenue for the full year ending March 31. Level 3 expects synergies from the deal to reduce its net debt to adjusted earnings before interest, tax, depreciation and amortization to 4.5 from 4.6.
