Level 3 Communications, Inc. (NYSE:LVLT) surged higher Monday after a pre-market announcement said Centurylink will acquire Level 3 in a cash and stock transaction valued at approximately $34 billion, including the assumption of debt.
Level 3 jumped 3.89% to close the day at $56.15 on volume of 44.80 million shares. However, shares of Centurylink tanked 12.54%.
Level 3 gained in price but lost some in analyst ratings, as a couple of firms downgraded the stock.
Level 3 Communications, Inc. (NYSE:LVLT) and Centurylink
Level 3 shareholders will receive $26.50 per share in cash and a fixed exchange ratio of 1.4286 shares of CenturyLink stock for each Level 3 share they own which is equivalent to a price of $66.50 per Level 3 share (assuming a CenturyLink price of $28.00 per share).
Post the transaction, the holdings in the combined entity will be in the ratio 51:49 of CenturyLink and Level 3 shareholders respectively.
“This is a compelling transaction for our customers, shareholders and employees,” said Jeff Storey, President and Chief Executive Officer of Level 3 in a statement. “In addition to the substantial value delivered to shareholders, the combined company will be uniquely positioned to meet the evolving and global needs of enterprise customers.”
As a result of the transaction, the combined companies will generate $975 million of annual run rate synergies.
The Chairman of CenturyLink’s Board at the time of the closing of the transaction will continue to serve as Chairman of the combined company. Glen Post will continue to serve as Chief Executive Officer and President and Sunit Patel, Executive Vice President and Chief Financial Officer of Level 3, will serve as Chief Financial Officer of the combined company.
Level 3 Communications, Inc. (NYSE:LVLT) ratings
Moody’s affirmed its credit rating of Level 3 after the announcement of the above deal.
Analysts at William Blair downgraded Level 3 to Market Perform.
Cowen & Co also cut their rating to Hold.