WASHINGTON — US Senator Bill Cassidy, MD, congratulates CenturyLink on the announcement of their acquisition of Level 3 Communications. The Monroe based communications company struck a deal with Level 3 Communications for $34 billion.
“This is a great day for Louisiana business,” said Dr. Cassidy. “This merger elevates CenturyLink amongst the top communications companies in the world and promotes Louisiana as a center for innovation and growth.”
Following the merger, the new company will be the second largest domestic communications provider serving global enterprise customers.
CenturyLink currently supports 2,800 jobs in Louisiana, contributing about $172 million in annual payroll, making it the largest public company headquartered in the state. The newly combined company will be headquartered in Monroe, Louisiana.
Strategic and Financial Benefits
· Highly Complementary Businesses with Expanded Fiber Networks: This transaction increases CenturyLink’s network by 200,000 route miles of fiber, which includes 64,000 route miles in 350 metropolitan areas and 33,000 subsea route miles connecting multiple continents. Accounting for those served by both companies, CenturyLink’s on-net buildings are expected to increase by nearly 75 percent to approximately 75,000, including 10,000 buildings in EMEA and Latin America. Overall, the complementary domestic and international networks will provide cost efficiencies by focusing capital investment on increasing capacity and extending the reach of the combined company’s high-bandwidth fiber network.
· Enhanced Competitive Offerings in Business Network Services: The combined company will have significantly improved network capabilities, creating a world-class enterprise player with approximately $19 billion in pro forma business revenue and$13 billion in business strategic revenue, for the trailing twelve months ended June 30, 2016. Together, CenturyLink’s and Level 3’s revenue will be 76 percent derived from business customers, and 65 percent of the combined company’s core revenue will be from strategic services. Given the complementary nature of the portfolios, the combined company will offer an even broader range of services and solutions to meet customers’ demand for more bandwidth and new applications in an increasingly complex operating environment.
· Enhanced Broadband Infrastructure: This transaction will provide the combined company with increased opportunity to invest in its broadband infrastructure and enhance broadband speed for small businesses and consumers.
· Strong Financial Profile: The combined company is expected to have improved adjusted EBITDA margins, revenue growth and pro forma net leverage of less than 3.7x at close, including run-rate synergies. The combined company will benefit from Level 3’s nearly $10 billion of net operating losses (“NOLs”). These NOLs will substantially reduce the combined company’s net cash tax expense over the next several years, positioning it to generate substantial free cash flow.
· Improved Dividend Coverage: The improved free cash flow will enhance the combined company’s financial flexibility and significantly lower its payout ratio. CenturyLink expects to maintain its annual dividend of $2.16 per share.
· Significantly Accretive to Free Cash Flow with Multiple Opportunities for Growth: CenturyLink expects the transaction to be accretive to free cash flow in the first full year following the close of the transaction and significantly accretive on an annual run-rate basis thereafter. Furthermore, the transaction will be accretive to CenturyLink’s existing growth profile with additional upside opportunities, including the ability to deploy CenturyLink’s and Level 3’s product portfolio across the combined customer bases. With increased network scale, and dense local metro areas and global reach, the combined company will be positioned to further expand internationally.
· Substantial Run-Rate Synergies: Both companies have a proven ability to integrate and meet or exceed synergy targets. The increased scale afforded by the combined company is expected to generate $975 million of annual run-rate cash synergies, primarily from the elimination of duplicative functions, systems consolidation, and increased operational and capital efficiencies.