Feeds

Level 3 submits Genuity bail-out bid

Genuity in Chapter 11

  • alert
  • submit to reddit

Top 5 reasons to deploy VMware with Tegile

ComputerWire: IT Industry Intelligence

Level 3 Communications Inc said it has agreed to pay up to $242m for most of rival Genuity Inc, the ailing data communications firm, in a deal that will require Genuity, laboring under almost $4bn of debt, to file for Chapter 11 bankruptcy protection,

writes Kevin Murphy

.

While many key Genuity stakeholders have approved the acquisition, one major creditor has not, and the bankruptcy court process allows for other bidders to step in with offers that could trump Level 3's bid. Court and regulatory approval is also required.

Level 3, which wants to increase its reach into the market for providing Internet services to enterprises, said it will take over a "significant portion" of Genuity's customers, and will continue to operate the business under the Genuity brand.

"This transaction represents the best outcome for all the key constituencies of both Genuity and Level 3," said Genuity CEO Paul Gudonis. "Both companies, as well as Genuity's largest customers and creditors, have signed agreements supporting the transaction."

Employees and Genuity shareholders will evidently have the most to complain about. All the $242m cash, plus whatever's left on Genuity's balance sheet when the transaction closes, will go to Genuity's creditors - a banking consortium and Verizon Communications.

Layoffs seem inevitable. There is a lot of crossover between the markets the companies service. For employees, Gudonis said the deal "offers the maximum possible opportunity for the greatest number of people." Genuity is headquartered in Woburn, Massachusetts, and has many global offices.

Level 3 has seen itself as the industry consolidator since July, when it received $500m from a consortium of investors led by billionaire Warren Buffet. Added to its $1bn cash pile, Level 3 found itself in a position to make acquisitions when rivals were declaring bankruptcy and going for a song.

Genuity is one such case. The firm has been fighting off its creditors since July, when it defaulted on over $3bn in loans from Verizon and its bank lenders after Verizon, also a major shareholder, declined to continue to fund the company by buying a majority stake. A question mark has hung over the firm since.

Level 3 CEO James Crowe said: "As with any acquisition, there is a risk that the Genuity transaction may not be completed, and we continue to analyze and consider other opportunities." Genuity said one of its banks, which it did not name, does not support the acquisition, leaving open the possibility the deal will be challenged.

If Level 3 manages to finalize the acquisition, which seems plausible given the apparently limited opposition and limited supply of potential counter-bidders, it will take over a number of important contracts. Before revealing the acquisition, the company made efforts to ensure major Genuity customers would stick around after it closes.

Verizon will continue to buy services from Genuity after the acquisition, and America Online Inc, which buys a portion of its network capacity from the company, has also agreed to continue to work with the firm. Together, these two firms brought in more than half of Genuity's revenue in its last quarter, Reuters reported.

© ComputerWire

Internet Security Threat Report 2014

More from The Register

next story
Facebook pays INFINITELY MORE UK corp tax than in 2012
Thanks for the £3k, Zuck. Doh! you're IN CREDIT. Guess not
DOUBLE BONK: Testy fanbois catch Apple Pay picking pockets
Users wail as tapcash transactions are duplicated
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
Google Glassholes are UNDATEABLE – HP exec
You need an emotional connection, says touchy-feely MD... We can do that
YARR! Pirates walk the plank: DMCA magnets sink in Google results
Spaffing copyrighted stuff over the web? No search ranking for you
In the next four weeks, 100 people will decide the future of the web
While America tucks into Thanksgiving turkey, the world will be taking over the net
prev story

Whitepapers

Choosing cloud Backup services
Demystify how you can address your data protection needs in your small- to medium-sized business and select the best online backup service to meet your needs.
Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.