Level 3 Buys Broadwing for $1.4 Billion

Level 3 continues its acquisitive ways with this morning's announcement that it will buy Broadwing Corp. for about $1.4 billion in cash and stock. Broadwing is perhaps best known to the public from a series of commercials in which Dennis Hopper described it as the "beautiful network."

Broadwing sure looked good to Level 3. Rumors of a Level 3-Broadwing deal have been circulating since last November, when Om Malik of GigaOm reported talks between the companies. Level 3 will pay $8.18 in cash, plus 1.34 shares of its common stock for each share of Broadwing, valuing Broadwing shares at $15.31 apiece, based on Level 3's closing price of $5.32 Monday. That's a 15 percent premium over Broadwing's closing price of $13.28 on Monday. Level 3 will pay a total of $744 million in cash and issue 122 million shares. The deal is expected to close in the first quarter of 2007.

"The acquisition of Broadwing is consistent with both the Level 3 wholesale market strategy as well as our more recent entry into the enterprise market," said Level 3 CEO James Crowe. "Broadwing has made great strides with national enterprise customers as a result of their strong product portfolio and national sales teams. This creates an exciting opportunity for us to leverage both of these capabilities to accelerate the growth of Level 3's Business Markets Group."

Level 3 estimates integration costs between $110 million and $130 million. The company expects Broadwing to start contributing adjusted operating income next year and about $200 million to $250 million of adjusted income in 2008.