DOJ Clears Level 3, tw telecom Merger

By Josh Long

The U.S. Justice Department has cleared the pending acquisition of tw telecom by Level 3 Communications. Level 3 said Monday the process is completed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR).

The acquisition is still pending approval by the Securities and Exchange Commission, Federal Communications Commission and various states.

Shareholders of tw telecom and Level 3 also must approve the $7.3 billion deal. In a press release, Level 3 said it and tw telecom will provide a joint proxy statement/prospectus to its respective stockholders.

Broomfield, Colorado-based Level 3 in July announced plans to acquire tw telecom for $5.7 billion and assume tw telecom’s $1.6 billion in debt in a deal worth a little less than $41 per share. Level 3 anticipates the merger will close in the fourth quarter.

Based on results in the 12 months that ended on March 31, 2014, the combined company generated pro forma revenues of $7.9 billion.

Founded in 1985 as Kiewit Diversified Group Inc., Level 3 13 years later raised $14 billion in pursuit of constructing a high-speed backbone network that could meet the explosive demand for Internet services.

But wholesale carriers such as Level 3 bled heavy financial losses for years and struggled to meet their debt obligations. After the telecom bubble burst in 2000, a number of Level 3’s competitors filed bankruptcy, either shuttering their operations or reorganizing with less debt. Level 3 hung around and scooped up rivals beginning with the 2005 acquisition of WilTel, formerly known as Williams Communications.

Arguably, Level 3’s most significant merger was with the once high-flying Global Crossing in 2011.

Earlier this summer, Level 3 said the acquisition of tw telecom will pair its global presence with tw telecom’s extensive local assets and operations in North America.

Level 3 estimates the pact will yield $2 billion in potential synergies at a time when the company has successfully transitioned to the black. In the six months that ended on June 30, Level 3 posted a profit of $163 million on revenues of $3.2 billion.