Level 3 Buying ICG

The Colorado telco finds an in-state mate.
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Level 3 (LVLT) signed a definitive agreement to acquire closely held ICG Communications for $163 million in cash and stock.

Level 3, Broomfield, Colo., said it would issue $127 million in unregistered shares and hand over $36 million in cash for ICG, which provides transport, IP and voice services to wireline and wireless carriers, Internet service providers and enterprise customers. ICG's network has over 2,000 metro and regional fiber miles in Colorado and Ohio and includes 500 points of presence. ICG serves more than 1,600 customers.

"ICG is a well-run business with a strong and growing base of customers," said Kevin O'Hara, president and chief operating officer of Level 3. "This transaction gives Level 3 the opportunity to further expand our footprint into areas where we see demand for our services, and to realize cost savings."

Level 3 said it expects ICG to generate $75 million to $80 million of annualized revenue and $10 million to $15 million of annualized positive cash flow after some $10 million in capital expenditures. Level 3 added that it expects annualized cash flow to improve to $30 million to $40 million once it has completed integration, which is expected to begin later this year.

The transaction does not include ICG's investments in New Global Telecom or Mpower Holding Corporation. Closing is expected to occur midyear 2006 and is subject to customary closing conditions, including receipt of applicable state and federal regulatory approvals.