Level 3 Communications to buy Global Crossing

Troubled Tier 1 network providers hope $1.9 billion merger will mean return to profitability

Shares of Level 3 Communications (NASDAQ: LVLT) and telecommunications services provider Global Crossing (NASDAQ: GLBC) soared Monday after Level 3 announced it would purchase Global for $1.9 billion.

Level 3 was up 15 cents, or 10.4 percent, to $1.59 by mid-afternoon, while Global Crossing shares reached as high as 26.50, or 79 percent above Friday's closing price of 14.80, before falling back to 23.37 later Monday.

Both money-losing Tier 1 network providers have struggled in recent years, with Global Crossing filing for bankruptcy in 2002, a victim of the bursting tech bubble and resultant diminished demand for fiber-optic networks.

Level 3's purchase price of 23.04 per share represents a premium of 56 percent over Global Crossing's Friday closing price.

In a statement announcing the deal, Level 3 CEO Jim Crowe said, "This is a transformational combination that we believe will deliver significant value to the investors, customers and employees of both Level 3 and Global Crossing. The complementary fit between the two companies’ networks, service portfolios and customers is compelling."

That remains to be seen. But certainly Global investors are thrilled with the premium purchase price offered by Level 3 for a company that hasn't had a profitable year since 2003. And Wall Street isn't punishing Level 3 for paying considerably more than Global's most recent valuation, so investors see some win-win here.

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