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Contributors: Douglas McIntyre Jon C. Ogg

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Tuesday, October 17, 2006

Level 3 Acquires Broadwing

Broadwing (BWNG) is being acquired by Level 3 (LVLT) in what is roughly a $1.4 Billion merger in cash and stock. The acquisition is expected to be adjusted OIBDA Positive in 2007 and cash flow positive in 2008.

Shares of Broadwing (BWNG) are up over 15% at $15.38 in pre-market trading, and shares of Level 3 (LVLT) are trading up 4.3% at $5.55 in pre-market trading.

Level 3 currently expects to pay approximately $744 million of cash and issue approximately 122 million shares. The ratio is being set at $8.18 per share in cash and 1.3411 shares of LVLT stock for every share of BWNG stock.

As of June 30, 2006, Level 3 had approximately $1.4 billion of cash and marketable securities on hand and this merger is expected to close in the first quarter of 2007. In the merger Level 3 will get to add a 19,000 mile fiber network to its existing backbone, and over half of Broadwing revenues come from wholesale markets and business customers filling the rest.

This will give the combined operations a better wholesale pricing and backbone structure that should be good for business customers across much of the nation.

Both companies have in recent months been rumored to be acquirers and both have been rumored to be acquisition targets.

Jon C. Ogg
October 17, 2006

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