Telecom company CenturyLink said on Monday it would buy Level 3 Communications in a cash-and-stock deal for an equity value of $19.43 billion to expand its fiber optic network and high-speed data services.
Level 3 shares were up about 5.5 percent at $57 in premarket trading while CenturyLink's shares were down 11.2 percent at $27.
CenturyLink will offer $26.50 in cash and 1.4286 of its shares for each Level 3 share held.
The deal will increase CenturyLink's network by 200,000 miles of fiber and combine Level 3's enterprise services with its network that provides internet and telephone offerings to millions of customers.
CenturyLink operates more than 55 data centers in North America, Europe and Asia and provides broadband, voice, video, data and managed services over a 250,000 mile fiber network in the United States and a 300,000 mile international network.
The deal comes at a time when business clients of both companies seek more bandwidth and faster networks to move data to run their businesses. The combined company will get 76 percent of its revenue from business customers, according to a statement from the companies.
"Together with Level 3, we will have one of the most robust fiber network and high-speed data services companies in the world," CenturyLink Chief Executive Glen Post said in a statement.
Post will lead the combined company after the deal is completed.
Including debt, the deal is valued at about $34 billion.
The deal, for about $66.50 per share, is at a premium of 42 percent from Level 3's Wednesday close. Reuters reported on Thursday that the companies were in advanced talks to merge.
Under the terms of the deal, expected to close by the end of the third quarter of 2017, CenturyLink shareholders will own about 51 percent of the combined company and the rest by Level 3 shareholders.
BofA Merrill Lynch and Morgan Stanley acted as CenturyLink's financial advisers while Wachtell, Lipton, Rosen & Katz and Jones Walker were its legal advisers.
Citigroup acted as Level 3's financial adviser and Willkie Farr & Gallagher LLP was as its legal adviser.
Up to Friday's close, CenturyLink's shares had fallen nearly 21 percent this year while those of Level 3 were marginally down.
(Reporting by Narottam Medhora and Supantha Mukherjee in Bengaluru; Editing by Sriraj Kalluvila and Shounak Dasgupta)