Level 3 to acquire WilTel

The telecom company will snap up WilTel's communications business in a stock and cash deal worth $680 million.

Level 3 Communications, a nationwide Internet backbone and fiber-optics provider, has agreed to acquire competitor WilTel Communications Group from Leucadia National for roughly $680 million in cash and stock.

Level 3 announced Monday that it will pay $370 million in cash and issue 115 million shares to purchase the company. The stock portion of the deal is valued at $310.5 million based on Friday's closing price of $2.70 for Level 3 shares.

WilTel, based in Tulsa, Okla., is a wholesale service provider of voice, data, video and Internet Protocol services over a nationwide fiber-optic network. Its biggest customer is SBC Communications, which is in the process of acquiring AT&T for $16 billion. The AT&T acquisition got the final approval from federal regulators on Monday when the Federal Communications Commission voted to support the merger. The deal is expected to close by the end of the year. Once it's complete, SBC plans to migrate services from the WilTel network to its new AT&T backbone.

Back in the late 1990s, WilTel, which was then called Williams Communications, spent billions of dollars laying fiber-optic cable across the United States. But when the telecommunications bubble burst, the company was forced to file for Chapter 11 bankruptcy protection. It emerged from bankruptcy protection in October 2002. Leucadia, a financial conglomerate based in New York with interests in a variety of industries, including banking, health care services and telecommunications, bought all the controlling shares in the company in 2003.

The Level 3 acquisition includes all of WilTel's communications business, but it does not include certain assets and liabilities, such as WilTel's headquarters or the assumption of any of its outstanding debt or mortgage obligations.

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