Level 3 Communications, Inc. today announced that it has completed its acquisition of WilTel Communications Group, LLC. As consideration, Level 3 has paid Leucadia National Corporation 115 million shares of Level 3 common stock and $386 million in cash.
Pursuant to the purchase agreement signed by Level 3 and Leucadia on October 30, 2005, Level 3's cash consideration at closing was increased from the previously announced amount of $370 million, to reflect an improvement in WilTel's working capital and is subject to adjustment based on the subsequent calculation of actual closing date working capital. Level 3 paid an additional $100 million in consideration for $100 million in cash held by WilTel at the time of closing.
"There is a unique and compelling fit between WilTel and Level 3," said James Q. Crowe, chief executive officer of Level 3. "Because of this and hard work by all involved, we have been able to close this transaction ahead of schedule. Through this process, we have continued our analysis of the WilTel business and are confident in the overall financial projections we provided at the time we announced the definitive agreement. We have also continued our integration planning and we are extremely pleased with the progress we have made leading up to today's announcement."
Financial projections
"We are reiterating our previously announced overall revenue and cash flow projections for the acquisition," said Sunit S. Patel, chief financial officer of Level 3. "This transaction adds substantial new revenue from high quality customers and creates value from significant synergies resulting from elimination of duplicative common resources and network infrastructure. We continue to expect the acquisition to add $1.5-1.6 billion in revenue to our 2006 communications revenue which approximately doubles the size of our existing communications business.
"While we recognize that the contribution from the AT&T (formerly SBC) contract will diminish over time in accordance with their contract with WilTel, we continue to expect that this transaction will contribute approximately $50-90 million of incremental cash flow in 2006 and $125-150 million of incremental cash flow annually from 2007 onward. We expect to provide more detail when we announce our 2005 fourth quarter results in February 2006." Integration costs are expected to be $100-150 million.