Qwest agrees to $22.4B buyout offer

General Services Administration Networx telecommunications contract holder Qwest Communications Inc. is merging with voice, video and broadband provider CenturyLink Inc. in a tax-free, stock-for-stock transaction.

The deal values Qwest at $22.4 billion, including assumption of the $11.8 billion in debt the company has been struggling with, especially over the past 18 months.

The combination is expected to strengthen the new company’s national breadth and local depth in providing broadband products and services, video entertainment, data hosting and managed services, and fiber-to-cell-tower connectivity.

As holder of both Universal and Enterprise Networx contracts, as well as other federal contracts — the company is also looking into bidding on the $10 billion joint GSA-Defense Information Systems Agency Future ComSatCom Acquisition -- Qwest Business brings a hefty presence to CenturyLink’s enterprise business services.

“This transaction is compelling for our shareholders, who will benefit from an immediate premium for their shares, an increase of approximately 50 percent in the annual dividend, and the opportunity to participate in the upside potential of the combined company through their ownership of CenturyLink stock,” Qwest Chairman and Chief Executive Officer Edward Mueller said.

CenturyLink CEO and president Glen Post said, “This combination will enhance our ability to deploy innovative IP products and high-bandwidth services to business customers, expand availability and speed to consumers, and offer superior, differentiated video products."

CenturyLink, formerly CenturyTel, and Qwest said that, based on 2009 revenues, the combined company is expected to generate $625 million in annual operating and capital synergies over the three to five years following the close of the transaction.

The combination would have had pro forma 2009 revenues of $19.8 billion, Qwest said.

The merger creates a nationwide 173,000-mile fiber network, with local service in 37 states, the companies said. The combined company will be based in Monroe, La., but have a “key operational presence" in Denver.

The combined company will bring in senior leaders from CenturyLink and Qwest, the companies said. However,  announcements made today named only CenturyLink executives:

• William Owens, CenturyLink non-executive chairman of the board, will continue as board chairman.
• Glen Post, CenturyLink CEO and president, will continue in that position. Qwest chairman and CEO Edward Mueller will be named to the board of directors.
• R. Stewart Ewing Jr. of CenturyLink will continue as chief financial officer.
• Karen Puckett of CenturyLink will continue as chief operating officer.
• Christopher Ancell, executive vice president of CenturyLink’s business markets group, will get a bump up to president of the new company’s business markets group.

After the transaction closes, anticipated to be in the first half of 2011, CenturyLink’s board of directors will add three members from the current Qwest board, in addition to Mueller.

Stockholders in Monroe-based CenturyLink will get 50.5 percent of the new merged company, while stockholders of the Denver-based Qwest will get 49.5 percent.