Level 3 Communications Inc. and Genuity Inc. announced today that they have signed a definitive agreement under which Level 3 will acquire substantially all of the assets of the Massachusetts-based communications company.
Level 3 will pay up to $242 million in cash and assume a significant portion of existing long-term operating agreements to acquire Genuity's assets and operations. To facilitate the transaction, Genuity today is filing voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code. Level 3's cash consideration at closing could be reduced subject to certain material adjustments.
Closing is expected to occur during the first quarter of 2003. The transaction is subject to approval by the bankruptcy court and certain government regulatory agencies.
"This transaction represents the best outcome for the key constituencies of both Genuity and Level 3," contends Paul R. Gudonis, chairman and chief executive officer of Genuity. "Both companies, as well as Genuity's largest customers and creditors, have signed agreements supporting the transaction."
"There is a unique and compelling fit between Genuity and Level 3," adds James Q. Crowe, Level 3's chief executive officer. "The transaction combines the assets and operations of Genuity, the company that helped invent the Internet, with Level 3, the company that built the first network fully optimized for Internet Protocol-based communications. Both companies are experienced providers of optical and IP-based services, and both are Tier 1 Internet backbone providers with industry-leading quality of service. Genuity's transport and dedicated and dial-up Internet access business--more than 80 percent of revenue--is complementary to Level 3's transport, managed modem and IP services business."
Based in Woburn, MA, Genuity operates an international IP network. The company provides dial-up and dedicated Internet access, transport, managed security and VPN, hosting and other services to communications companies, enterprises and government agencies. Its largest customers are Verizon Communications and America Online, which accounted for greater than 60 percent of its $223 million in revenue for the third quarter of 2002.
All but one of Genuity's banks have signed an agreement in support of the transaction. Verizon has executed a new multi-year contract to purchase wholesale dial-up, IP, transport and other services from Level 3, to take effect when the transaction closes. America Online has signed an agreement consenting to the transaction that contemplates Level 3 acquiring America Online's network services agreement with Genuity. In addition, Allegiance Telecom Inc., Genuity's largest network supplier, supports the transaction.
As part of this transaction, Level 3 is also acquiring Genuity's managed services business and its associated enterprise customers and product set. "We recognize the importance of these customers and are committed to ensuring they receive the highest quality service without disruption," asserts Kevin O'Hara, president and chief operating officer of Level 3. "As a result, we plan to combine these operations with those of our (i)Structure subsidiary in order to focus on the needs of those customers. That new managed services operating company will do business under the name 'Genuity,' a recognized leader in that market."
For more information about Level 3 Communications (Broomfield, CO), visit the company's Web site at www.Level3.com.