Posted on 07/24/2002 7:52:56 PM PDT by Libloather
Level 3 Bids for Williams Comms
Wed Jul 24, 3:21 PM ET
NEW YORK (Reuters) - Level 3 Communications Group Inc. , which recently received a cash infusion from billionaire Warren Buffett, has offered to buy Williams Communications Group Inc., for about $1.08 billion, a person familiar with the situation said on Wednesday.
A Williams spokesperson confirmed that it had received a bid from Level 3, but declined to disclose other details. The offer was one of a number of bids that Williams, based in Tulsa, Oklahoma, has received, the spokeswoman said.
Level 3 officials, attending the company's annual shareholder meeting in Omaha, were not immediately available for comment.
Level 3's $1.1 billion bid for Williams is contingent on Williams having $450 million on its balance sheet, one person familiar with the transaction said. The bid comes as Williams is finalizing a deal with another investor, Leucadia National Corp., that could enable it to emerge as a stand-alone company controlled by bondholders, the Wall Street Journal reported.
Level 3 shares rose 10 cents, or 1.8 percent, to $5.60. Level 3 shares, which dropped sharply in early July, have doubled since Buffett announced his backing of the company.
Bondholders seem to be opposed to Level 3's bid, according to a person close to situation.
"Level 3 leaked this to the press to try to muck up the deal in the works, but I don't think they will succeed," said one source, calling it a "desperate attempt" by Level 3 to push through a deal opposed by bondholders.
Buffett and two other investors said on July 8 that they had invested $500 million in Level 3, a high-speed communications company based in Broomfield, Colorado.
Buffett's foray into technology gave a shot of credibility to a sector that many investors, including Buffett, have shied away from as being too risky.
Level 3 said it would use the funds to buy assets from rivals and take customers from competitors.
The bid comes at a time when the telecommunications industry is in upheaval. WorldCom Inc., the nation's second largest long-distance carrier, filed for bankruptcy protection on Sunday after admitting last month that wrongful accounting inflated results for five quarters.
Global Crossing Ltd. , meanwhile, is auctioning assets following its bankruptcy filing in January. Level 3 is reportedly interested in some Global Crossing assets.
Williams Communications itself filed for bankruptcy protection in April as slumping demand for telecommunications, a glut of network capacity and stiff competition pushed up the company's debt load.
Level 3 Chief Executive James Crowe declined to comment on any specific acquisition prospects at the shareholder meeting, but told investors he sees many advantages to grabbing the customers and revenues of peers in the ailing industry.
He also indicated that there is significant paring to be done among his competitors.
"If you see us buy any particular company, don't be surprised to see us shut down lots of assets and abandon them," Crowe said.
Crowe said he expects one dominant company to emerge from the sector with more than half the telecommunications business, and joked that he hoped Level 3 one day would grow so much to be the subject of an antitrust investigation for being a monopoly -- but with an exoneration in the end.
Level 3 last week reported a smaller-than expected second- quarter loss, but said revenue increased slightly. The company, which lost $6.10 a share in 2001, expects to post a third- quarter loss.
Until the cable and DSL providers provide more bandwidth cheaper, backbone bandwidth and hosting bandwidth will remain slack.
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