Level 3 Makes Deal for Broadwing

Network operator Level 3 Communications Inc. took another step in its transformation Tuesday by announcing a $1.4-billion cash-and-stock deal to acquire Broadwing Corp., which sells communications services.

If the acquisition is finalized, Broadwing would become the latest in a string of companies Level 3 has acquired as part of its strategy to offer Internet service from one locale to another without relying on -- or paying -- a third party for part of the transmission.

The acquisition would enable Level 3 to put Broadwing’s customers on its network and eliminate duplication, Level 3 President and Chief Operating Officer Kevin O’Hara said.

Level 3 agreed to pay $744 million in cash and issue 122 million shares, which would translate to $8.18 a share in cash and 1.34 shares for each share of Broadwing. The offer represented a 15% premium over Broadwing’s closing price of $13.28 a share Monday.

The deal is expected to close in the first quarter of 2007 pending approval by regulators and Broadwing shareholders.

O’Hara said no decisions had been made on potential layoffs that might occur as Broadwing is folded into Level 3’s operations.

Based in the Denver suburb of Broomfield, Colo., Level 3 offers Internet communication services over its 23,000-mile broadband fiber optic network. The industry leaders are such companies as Verizon Communications Inc. and SBC while Level 3 fits into a group of smaller competitors such as Qwest Communications International Inc.

“Level 3 starts to look very attractive in that next tier,” O’Hara said. “But, to be fair, we’re still a small player compared to the behemoths.”

Based in Austin, Texas, Broadwing sells data, voice and media products and services to business and other service providers over a 19,000-mile intercity fiber network.

Level 3’s stock rose 70 cents to $6.02, while Broadwing’s stock increased $2.62 to $15.90.