Exhibit 99.1
[Logo]
1025 Eldorado Boulevard
Broomfield, Colorado 80021
www.Level3.com
NEWS RELEASE
Level 3 contacts:
Media: Josh Howell Investors: Robin Grey
720-888-2517 720-888-2518
Chris Hardman Valerie Finberg
720-888-2292 720-888-2501
Level 3 to Acquire Broadwing Corporation
Combination Will Further Leverage Level 3's Nationwide Network
Acquisition Expected to be Adjusted OIBDA Positive
in 2007 and Cash Flow Positive in 2008
Purchase Price of Approximately $1.4 Billion in Aggregate Cash and Stock
Acquisition Expected to Accelerate Growth of Level 3's Business Markets Group
BROOMFIELD, Colo., October 17, 2006 -- Level 3 Communications, Inc. (Nasdaq:
LVLT) today announced that it has signed a definitive agreement to acquire
Broadwing Corporation (Nasdaq: BWNG), a publicly held provider of optical
network communications services. Under the terms of the agreement, Level 3 will
pay $8.18 of cash plus 1.3411 shares of Level 3 common stock for each share of
Broadwing common stock outstanding at closing. In total, Level 3 currently
expects to pay approximately $744 million of cash and issue approximately 122
million shares.
Broadwing, based in Austin, Texas, delivers data, voice and media solutions to
enterprises and service providers over its 19,000 mile intercity fiber network.
Approximately half of Broadwing's revenue comes from the wholesale market, with
business customers comprising the remaining revenue.
"The acquisition of Broadwing is consistent with both the Level 3 wholesale
market strategy as well as our more recent entry into the enterprise market,"
said James Q. Crowe, chief executive officer of Level 3. "We believe the
combination of Level 3 and Broadwing will create value for our investors through
the elimination of duplicative network and operating costs, the addition of a
solid revenue base, and a further strengthening of our financial position.
"Broadwing has made great strides with national enterprise customers as a result
of their strong product portfolio and national sales teams. This creates an
exciting opportunity for us to leverage both of these capabilities to accelerate
the growth of Level 3's Business Markets Group."
"We are confident in our ability to successfully integrate Broadwing," said
Kevin O'Hara, president and chief operating officer of Level 3. "We have
completed the majority of integration efforts from our WilTel acquisition under
budget and ahead of schedule. The integration activities for our more recent
acquisitions are also on plan."
"Bringing together the resources and talents of Broadwing and Level 3 is an
exciting opportunity for our company, allowing us to capitalize on the strengths
of both companies and on advances in technology," said Steve Courter, chief
executive officer of Broadwing Corporation. "The combination of our two
operations will create a powerful company in the global telecommunications
industry with strong growth potential."
"During 2006, Broadwing has grown revenue and improved its margin profile," said
Sunit Patel, chief financial officer of Level 3. "Broadwing has had success with
expanding its enterprise customer base and service offerings as well as its
transport business. We expect the combined operations to directly benefit from
these efforts.
"Broadwing is expected to contribute positive Adjusted OIBDA in 2007, and even
though we expect integration efforts to extend into 2008, we expect Broadwing
will generate approximately $200-$250 million of Consolidated Adjusted OIBDA in
2008.
"Including the benefit of synergies and the cost of integration including
capital expenditures, this transaction is free cash flow positive in 2008 and
should contribute over $200 million of free cash flow in 2009. Total integration
costs are expected to be approximately $110-$130 million.
"We expect the transaction to further improve Level 3's financial position and
reduce leverage given its expected positive Adjusted OIBDA contribution and
Broadwing's approximately $150 million of net cash as of June 30, 2006."
As of June 30, 2006, Level 3 had approximately $1.4 billion of cash and
marketable securities on hand as adjusted for the acquisitions of TelCove and
Looking Glass, the sale of Software Spectrum and the redemption of its
outstanding 9.125% Senior Notes due 2008 and10.50% Senior Discount Notes due
2008.
Closing is subject to customary conditions, including receipt of applicable
state and federal regulatory approvals, and is also subject to the approval of
the stockholders of Broadwing. Closing is expected to occur in the first quarter
of 2007.
Level 3 will hold an investor and media conference call today to discuss the
announcement at 10 a.m. EDT. To join the call, please dial (612) 332-1025. A
live broadcast of the call can also be heard on Level 3's Web site at
www.Level3.com. An audio replay of the call will be available within 24 hours
after the call through the Web site or by dialing (320) 365-3844 - Access code
845296.
Level 3 was advised on the transaction by Evercore Partners, JPMorgan and
Merrill Lynch & Co. Level 3 received legal representation from Willkie Farr &
Gallagher LLP.
About Level 3 Communications
Level 3 Communications, Inc (Nasdaq: LVLT), an international communications
company, operates one of the largest Internet backbones in the world. Through
its customers, Level 3 is the primary provider of Internet connectivity for
millions of broadband subscribers. The company provides a comprehensive suite of
services over its broadband fiber optic network including Internet Protocol (IP)
services, broadband transport and infrastructure services, colocation services,
voice services and voice over IP services. These services provide building
blocks that enable Level 3's customers to meet their growing demands for
advanced communications solutions. The company's Web address is www.Level3.com.
"Level 3 Communications," "Level 3" and the Level 3 Communications logo are
registered service marks of Level 3 Communications, Inc. in the United States
and/or other countries. Any other product and company names herein may be
trademarks of their respective owners. Level 3 services are provided by wholly
owned subsidiaries of Level 3 Communications, Inc.
Forward-Looking Statement
This press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements include, but are not limited to, (i) statements about the benefits of
the acquisition of Broadwing by Level 3, including financial and operating
results and synergy benefits that may be realized from the acquisition; Level
3's and Broadwing's plans, objectives, expectations and intentions and other
statements contained in this presentation that are not historical facts; and
(ii) other statements identified by words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates" or words of similar
meaning. These forward-looking statements are based upon management's current
beliefs or expectations and are inherently subject to significant business,
economic and competitive uncertainties and contingencies and third-party
approvals, many of which are beyond our control. The following factors, among
others, could cause actual results to differ materially from those described in
the forward-looking statements: (1) whether the stockholders of Broadwing
approve the proposed transaction; (2) the satisfaction of the other conditions
specified in the merger agreement, including without limitation the receipt of
required governmental approvals of the proposed transaction; (3) the ability to
successfully combine the businesses of Level 3 and Broadwing; (4) the
realization of revenue and cost synergy benefits from the proposed transaction;
and (5) operating costs, customer loss and business disruption following the
merger, including adverse effects on relationships with employees. Other
important factors that may affect Level 3's and the combined business' results
of operations and financial condition include, but are not limited to:
increasing the volume of traffic on Level 3's network; developing new products
and services that meet customer demands and generate acceptable margins;
successfully completing commercial testing of new technology and information
systems to support new products and services, including voice transmission
services; stabilizing or reducing the rate of price compression on certain of
our communications services; integrating strategic acquisitions including the
acquisition of Broadwing; attracting and retaining qualified management and
other personnel; and the ability to meet all of the terms and conditions of our
debt obligations. Level 3's Annual Report on Form 10-K, subsequent Quarterly
Reports on Form 10-Q, recent Current Reports on Form 8-K and other Securities
and Exchange Commission filings discuss the foregoing risks as well as other
important risk factors that could contribute to such differences or otherwise
affect our business, results of operations and financial condition. The
forward-looking statements in this release and the related conference call for
analysts and investors speak only as of the date they are made. Level 3 and
Broadwing do not undertake any obligation to update any forward-looking
statement to reflect circumstances or events that occur after the date such
forward-looking statement is made.
This press release shall not constitute an offer of any securities for sale. The
proposed transaction will be submitted to Broadwing's stockholders for their
consideration. Level 3 and Broadwing will file a registration statement, a proxy
statement/prospectus and other relevant documents concerning the proposed
transaction with the SEC. Stockholders of Broadwing are urged to read the
registration statement and the proxy statement/prospectus and any other relevant
documents filed with the SEC when they become available, as well as any
amendments or supplements to those documents, because they will contain
important information. Stockholders of Level 3 can obtain more information about
the proposed transaction by reviewing the Form 8-K to be filed by Level 3 in
connection with the announcement of the transaction, and any other relevant
documents filed with the SEC when they become available. You will be able to
obtain a free copy of the proxy statement/prospectus, as well as other filings
containing information about Level 3 and Broadwing, at the SEC's Web site
(http://www.sec.gov). Copies of the proxy statement/prospectus and the SEC
filings that will be incorporated by reference in the proxy statement/prospectus
can be obtained, without charge, by directing a request to Level 3, Investor
Relations, 1025 Eldorado Blvd., Broomfield, CO 80021, 720-888-2500 or to
Broadwing, Investor Relations, 1122 Capital of Texas Highway South Austin, TX
78746-6426, (866) 426-7847.
Level 3, Broadwing and their respective directors and executive officers may be
deemed to be participants in the solicitation of proxies from the stockholders
of Broadwing in connection with the proposed transaction. Information about the
directors and executive officers of Level 3 is set forth in the proxy statement
on Schedule 14A, dated April 6, 2006, as supplemented, for Level 3's 2006 annual
meeting of stockholders. Information about directors and executive officers of
Broadwing and their ownership of Broadwing common stock is set forth in the
proxy statement on Schedule 14A, filed with the SEC on March 24, 2006, for
Broadwing's 2006 annual meeting of stockholders. Additional information
regarding participants in the proxy solicitation may be obtained by reading the
proxy statement/prospectus regarding the proposed transaction when it becomes
available.
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