Will The Acquisition Of TW Telecom By Level 3 Communications Accelerate Cash Growth?


  • Both firms have the same focus; enterprise customers.
  • Small network overlap bodes well for increasing existing customer sales in addition to new customer sales.
  • Free cash flow per share is accretive after 2015; total free cash flow dollars increase substantially.

On June 16, 2014 Level 3 Communications (LVLT) and tw telecom (TWTC) announced Level 3 will acquire tw telecom in a stock-and-cash transaction valued at $41.92 per share at the time of this writing. Under the terms of the agreement tw telecom stockholders will receive $10 cash and 0.7 shares of Level 3 common stock for each share of tw telecom common stock at closing. The deal is expected to close in the fourth quarter.

Is this a good deal for the Level 3 shareholder? The deal must be accretive to FCF (free cash flow). The announcement noted the transaction is expected to be accretive to Free Cash Flow per share after the first year following transaction close but the magnitude of the gains are not defined. This article attempts to define these gains. We’ll also highlight EPS and EBITDA effects but the focus is FCF.


We’ve discussed in past articles that when Level 3 made a leadership change they also shifted their focus on Enterprise customers. Level 3’s growth driver is Enterprise and has been gaining traction over the last year as shown below:
…Click here to continue to the full article…


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