TW Telecom, Level 3 Shares Spike Higher On Acquisition Announcement

Level 3 Communications LVLT will be rolling out approximately $7.3 billion for TW Telecom TWTC.

In a deal announced Monday morning, TW Telecom shareholders will be receiving $10 and 0.7 shares of Level 3 per share of TW Telecom they own; the sum is valued at $41.50 per the most recent trade Monday morning.

The announcement claims that the combination of companies will annually save $240 million, $200 million of which is from adjusted EBITDA and $40 million from capital expense savings. Seventy percent of EBITDA savings are expected to take place within the first 18 months. A $170 integration cost is expected. The NPV of synergy savings is expected to be $2 billion.

Related: TW Telecom, Level 3 Moving higher On Acquisition Rumor

Level 3 CEO Jeff Storey commented on the deal, “The benefits created by this transaction deliver substantial value to both companies' stockholders, as it accelerates our objective of driving profitable growth and strengthening Free Cash Flow per share growth over the long term."

Despite dilution, shares of Level 3 are up two percent in pre-market trading to $45. TW Telecom shares have gaped 11. 6 percent higher to $40.55. The $0.95 discrepancy from the takeover value indicates traders are building in a chance the deal will not go through, or that Level 3 shares will drop before the deal closes.

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