[1st-mile-nm] Qwest - CenturyLink Merger Announced
Richard Lowenberg
lowenberg at designnine.com
Thu Apr 22 06:50:24 PDT 2010
Abbreviated from Qwest's web site. We'll be seeing lots more news
about this. RL
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http://news.qwest.com/centurylinkqwestmerger
CenturyLink and Qwest Agree to Merge
CenturyLink to Become National, Industry-Leading Communications
Company with Pro Forma 2009 Revenues of $19.8 Billion
Combined Company to Have Extensive Broadband Capabilities with 173,000-
mile Fiber Network
Compelling Choice for Consumer, Business and Wholesale Customers
Offering Full Array of Communications Services
Transaction Expected to be Accretive to Free Cash Flow per Share,
Excluding Integration Costs, Immediately Following Close of the
Transaction
MONROE, La. and DENVER, Co. – April 22, 2010 – CenturyLink and Qwest
Communications announced today that their boards of directors have
approved a definitive agreement under which CenturyLink will acquire
Qwest in a tax-free, stock-for-stock transaction. Under the terms of
the agreement, Qwest shareholders will receive 0.1664 CenturyLink
shares for each share of Qwest common stock they own at closing. Upon
closing of the transaction, CenturyLink shareholders are expected to
own approximately 50.5 percent and Qwest shareholders are expected to
own approximately 49.5 percent of the combined company.
Based on the closing stock price of CenturyLink on April 21, 2010, the
per share consideration to be received by Qwest shareholders would be
equivalent to $6.02 of CenturyLink stock, which represents a premium
to Qwest shareholders of approximately 15 percent over Qwest’s closing
stock price on April 21, 2010. Based on the closing stock price of
CenturyLink on April 21, 2010, the transaction reflects an enterprise
value of Qwest of approximately $22.4 billion, including the
assumption of $11.8 billion of Qwest net debt outstanding as of
December 31, 2009.
The parties expect the transaction to be accretive to CenturyLink’s
free cash flow per share, excluding integration costs, immediately
following the close of the transaction. Leveraging CenturyLink’s
proven integration experience, the transaction is expected to generate
annual operating and capital synergies of approximately $625 million
when fully recognized over a three- to five-year period following the
close of the transaction.
This combination will result in a company whose enterprise business
will be a significant contributor to its growth which, along with the
consumer business, will allow it to offer innovative broadband
products and services over its advanced networks. As of December 31,
2009, CenturyLink and Qwest served local markets in 37 states with
approximately 5 million broadband customers, 17 million access lines,
1,415,000 video subscribers and 850,000 wireless consumers.
Glen F. Post III, CenturyLink’s chief executive officer and president,
said, “We believe the combination of CenturyLink’s and Qwest’s
employees, assets and service areas will provide us greater scale,
scope and expertise and will provide significant benefits for
shareholders, customers and our communities. This combination will
enhance our ability to deploy innovative IP products and high-
bandwidth services to business customers, expand broadband
availability and speed to consumers, and offer superior,
differentiated video products.
“The combined company’s highly recognized national network will
significantly expand our ability to deliver strategic and customized
product and service solutions to our business, wholesale and
government customers throughout the country. In addition, we will
still maintain the focus on our local markets through our effective
regional operating model and targeted marketing strategies. We
believe shareholders will benefit through their investment in a
company that has greater financial resources and flexibility,
including a more diversified revenue base and an enhanced competitive
position.”
Edward A. Mueller, Qwest’s chairman and chief executive officer, said,
“Over the last several years, Qwest has been focused on generating
sustainable free cash flow and strengthening the balance sheet, as
well as creating innovative approaches to drive efficiency and perfect
the customer experience. We are pleased with the progress we have
made and believe that the combined company will be well positioned to
win in an increasingly competitive marketplace.
“This transaction is compelling for our shareholders, who will benefit
from an immediate premium for their shares, an increase of
approximately 50 percent in the annual dividend, and the opportunity
to participate in the upside potential of the combined company through
their ownership of CenturyLink stock. We look forward to becoming
part of a larger company with a strong financial profile, an industry-
leading local and national network, and a shared commitment to
customers, employees, communities and shareholders. We also look
forward to maintaining a key presence in Denver.”
Key Benefits of the Transaction
Increased Capabilities: The combination creates a robust, national
173,000-mile fiber network. With a more diverse mix of offerings,
increased scale and stronger product portfolio, the company will be
able to reach more customers with a broad range of solutions.
Expanded and Enhanced Competitive Offerings: The company will have the
national breadth and local depth to provide a compelling array of
broadband products and services including high speed Internet, video
entertainment, data hosting and managed services, as well as fiber to
cell tower connectivity and other high bandwidth services. In
addition, Qwest Business serves 95 percent of Fortune 500 companies
and is one of the three universal service providers for Networx, the
largest communications services contract in the world.
Financial Strength and Flexibility: For the 12 months ended December
31, 2009, the combined company would have had pro forma revenues of
$19.8 billion, pro forma EBITDA of approximately $8.2 billion, and pro
forma free cash flow of approximately $3.4 billion, excluding
synergies. The combined company’s pro forma net leverage would have
been 2.2 times EBITDA for the 12 months ended December 31, 2009,
including synergies on a full run-rate basis and excluding integration
costs. No new financing or refinancing is required as a result of
this transaction. The combined company’s sound capital structure and
significant free cash flow generation are expected to support its
ability to take advantage of opportunities that may arise, while
continuing to invest in its business, reduce indebtedness and return
substantial capital to shareholders.
Significant Synergy Opportunities: The transaction is expected to
generate annual operating cost synergies of approximately $575
million, which are expected to be fully realized three to five years
following closing. Key drivers of these synergies include reduction
of corporate overhead, elimination of duplicate functions and systems,
and increased operational efficiencies. The transaction also is
expected to generate annual capital expenditure synergies of
approximately $50 million within the first two years after close.
Based on current expectations, CenturyLink estimates that it will
incur approximately $650 to $800 million of operating costs and
approximately $150 to $200 million of one-time capital costs to
achieve these operational synergies.
Management, Board of Directors and Headquarters
The combined company’s senior leadership team is expected to be
comprised of executives from both CenturyLink and Qwest, of which the
following are being announced today.
William A. Owens will be chairman of the board
Glen F. Post, III will be chief executive officer and president
R. Stewart Ewing, Jr. will be chief financial officer
Karen A. Puckett will be chief operating officer
Christopher K. Ancell will be president of business markets group
Following the close of the transaction, the board of directors of
CenturyLink will add four members from the current Qwest board,
including Edward A. Mueller, Qwest’s chairman and chief executive
officer.
The corporate headquarters of the company will remain in Monroe, La.
The company also will maintain a key operational presence in Denver,
including a regional headquarters, the Qwest Business Markets Group,
as well as other functions to be determined.
Approvals and Timing
The transaction is subject to regulatory approvals, including
expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act as well as approvals from
the Federal Communications Commission and certain state public service
commissions, along with other customary closing conditions. The
transaction also is subject to the approval of CenturyLink and Qwest
shareholders. The companies anticipate closing this transaction in
the first half of 2011.
Teleconference and Webcast
CenturyLink and Qwest will host a conference call with the financial
community today, April 22, 2010, at 9:30 a.m. EDT / 8:30 a.m. CDT /
7:30 a.m. MDT to discuss this morning’s announcement. The conference
call will be webcast live over CenturyLink’s website at www.CenturyLink.com
and over Qwest’s website at investor.qwest.com. Interested parties
also can join the call by dialing (866) 610-1072 (international: (973)
935-2840), and referencing code 69793352, 10 minutes prior to the
start of the call.
More information about the transaction is available on
centurylinkqwestmerger.com.
About CenturyLink
CenturyLink is a leading provider of high-quality voice, broadband and
video services over its advanced communications networks to consumers
and businesses in 33 states. CenturyLink, headquartered in Monroe,
La., is an S&P 500 Company and is listed in the Fortune 500 list of
America’s largest corporations. For more information on CenturyLink,
visit www.CenturyLink.com.
About Qwest
Customers coast-to-coast turn to Qwest's industry-leading national
fiber-optic network and world-class customer service to meet their
communications and entertainment needs. For residential customers,
Qwest offers a new generation of fiber-optic-fast Internet service,
high-speed Internet solutions, as well as digital home phone, wireless
service available through Verizon Wireless and DIRECTV services.
Qwest is also the choice of 95 percent of Fortune 500 companies,
offering a full suite of network, data and voice services for small
businesses, large businesses, government agencies and wholesale
customers. Additionally, Qwest participates in Networx, the largest
communications services contract in the world, and is recognized as a
leader in the network services market by leading technology industry
analyst firms.
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Richard Lowenberg
P. O. Box 8001, Santa Fe, NM 87504
505-989-9110 off.; 505-603-5200 cell
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