Level 3 to buy WilTel
Level 3 Communications Inc. has agreed to buy Internet services provider WilTel Communications Group LLC for $370 million in cash and 115 million shares of Level 3 common stock. The deal is expected to close in the first quarter of 2006.
Tulsa, Okla.-based WilTel delivers voice, data, video and IP services over a next-generation fiber-optic network.
"We expect to achieve substantial synergies through this transaction," Kevin O'Hara, Level 3 resident and chief operating officer, said in a statement. "We plan to combine and optimize the Level 3 and WilTel networks. The merged network will reach 50 new markets and include 3,000 new route miles compared with Level 3's pre-acquisition facilities. We expect to migrate substantially all of WilTel's IP, optical and voice transport traffic to the combined network."
Under the agreement, Level 3 of Broomfield, Colo., will acquire from WilTel owner, Leucadia National Corp. of New York, all of WilTel's communications business, including its Vyvx video transmission business and a lucrative contract with SBC Communications Inc. of San Antonio that runs through 2009 and is worth $675 million, plus a possible $50 million performance bonus.
Vyvx reported $120 million in revenue in 2004 and $59 million in revenue for the first six months of 2005, according to a Level 3 statement. The company said it expects WilTel to contribute $1.5 billion to $1.6 billion of revenue in 2006.
The acquisition does not include WilTel's headquarters building, credit facility or any of WilTel's outstanding debt or mortgage obligations.
Level 3 provides network services to more than 30 federal agencies, including the Defense, Homeland Security, Health and Human Services and Treasury departments.
Level 3 has more than 4,500 employees and annual sales of $3.7 billion, according to Hoover's Online of Austin, Texas.
Sami Lais is a special contributor to Washington Technology.