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Level 3 Buys WilTel for $680M in Cash, Stock

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BROOMFIELD, Colo., Oct. 31 -- IP fiber optic network provider Level 3 Communications Inc. today announced that it has signed a definitive agreement with Leucadia National Corp. to acquire its WilTel Communications Group LLC for approximately $680 million -- 115 million shares of common stock currently valued at $310 million and $370 million cash. The closing is expect to occur in the first quarter of 2006, pending regulatory approval.
WilTel delivers voice, data, video and IP services over a next-generation fiber optic network. Under the agreement, Level 3 will not acquire WilTel's Tulsa headquarters, its $60 million mortgage or WilTel's $358 million credit facility. It does include all of WilTel's communications business, including a multiyear, $675 million contract with its largest customer, SBC, and WilTel's Vyvx video transmission business. As part of the transaction, Leucadia will retain the right to receive a $236 million termination payment from SBC, which is expected to phase out its WilTel contract due to SBC's pending merger with AT&T, moving the services WilTel provides to the combined SBC/AT&T network.

Level 3 President and COO Kevin O'Hara said that the combined company will reach 50 new markets and include 3000 new route miles compared to Level 3's pre-acquisition facilities.

Including the SBC contract, Level 3 says it expects WilTel to contribute $1.5 to $1.6 billion in revenue in 2006. With the expected migration of SBC traffic to the merged SBC and AT&T facilities, this amount is expected to decline to approximately $600 million in 2008. Level 3 says it expects WilTel to contribute approximately $50-90 million in cash flow in 2006, including integration costs, and approximately $125-150 million on an annual basis thereafter.

Level 3 officials say they expect the integration of Level 3 and WilTel's networks will take 15 to 18 months, and may involve the elimination of some jobs.

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Oct 2005
The technology of generating and harnessing light and other forms of radiant energy whose quantum unit is the photon. The science includes light emission, transmission, deflection, amplification and detection by optical components and instruments, lasers and other light sources, fiber optics, electro-optical instrumentation, related hardware and electronics, and sophisticated systems. The range of applications of photonics extends from energy generation to detection to communications and...
acquisitionsAT&TCommunicationsLeucadiaLevel 3networkNews & FeaturesphotonicsSBCWilTel

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