CenturyLink and Qwest Agree to Merge in $22.4 Billion Deal

CenturyLink and Qwest Communications announced today that their boards of directors have approved a definitive agreement under which CenturyLink will acquire Qwest in a tax-free, stock-for-stock transaction.

Based on the closing stock price of CenturyLink on April 21, the transaction reflects an enterprise value of Qwest of approximately $22.4 billion, including the assumption of $11.8 billion of Qwest net debt outstanding as of December 31, 2009.

Based on the closing stock price of CenturyLink on April 21, the per share consideration to be received by Qwest shareholders would be equivalent to $6.02 of CenturyLink stock, which represents a premium to Qwest shareholders of approximately 15 percent over Qwest’s closing stock price on April 21.

Upon closing of the transaction, CenturyLink shareholders are expected to own approximately 50.5 percent and Qwest shareholders are expected to own approximately 49.5 percent of the combined company.

As of December 31, 2009, CenturyLink and Qwest served local markets in 37 states with approximately 5 million broadband customers, 17 million access lines, 1,415,000 video subscribers and 850,000 wireless consumers.

Glen Post, CenturyLink’s CEO and president, said in a statement, “We believe the combination of CenturyLink’s and Qwest’s employees, assets and service areas will provide us greater scale, scope and expertise. This combination will enhance our ability to deploy innovative IP products and high-bandwidth services to business customers, expand broadband availability and speed to consumers, and offer superior, differentiated video products."
 
Edward Mueller, Qwest’s chairman and CEO, said in a statement, “We look forward to becoming part of a larger company with a strong financial profile. We also look forward to maintaining a key presence in Denver.”
 
The combined company creates a national 173,000-mile fiber network.  The company will have the national breadth and local depth to provide an array of broadband products and services including high speed Internet, video, data hosting and managed services, as well as fiber to cell tower connectivity and other high bandwidth services.

In addition, Qwest Business serves 95 percent of Fortune 500 companies and is one of the three universal service providers for Networx, the largest communications services contract in the world.
 
The transaction is expected to generate annual operating cost synergies of approximately $575 million, which are expected to be fully realized three to five years following closing. Key drivers of these synergies include reduction of corporate overhead, elimination of duplicate functions and systems, and increased operational efficiencies.  The transaction also is expected to generate annual capital expenditure synergies of approximately $50 million within the first two years after close.

Each company plans to continue its current dividend policy until the close of the transaction. Post closing, CenturyLink expects to continue its current dividend for shareholders of the combined company, subject to Board approval.  CenturyLink currently pays an annual dividend of $2.90 per share, which, on an as-converted basis, represents an approximately 50 percent dividend increase for Qwest shareholders.

The combined company’s senior leadership team will be comprised of:

• William A. Owens – chairman of the board
• Glen F. Post, III – chief executive officer and president
• R. Stewart Ewing, Jr. – chief financial officer
• Karen A. Puckett – chief operating officer
• Christopher K. Ancell – president of business markets group

Following the close of the transaction, the board of directors of CenturyLink will add four members from the current Qwest board, including Edward Mueller, Qwest’s chairman and CEO.

The corporate headquarters of the company will remain in Monroe, Louisiana.  The company also will maintain a key operational presence in Denver, including a regional headquarters, the Qwest Business Markets Group, as well as other functions to be determined.

The transaction is subject to regulatory approvals, and is expected to close in the first half of 2011.