Merger Positions Level 3 for Convergence of Broadband And Software Distribution Industries
Combined, Level 3 Subsidiaries Now Among World's Largest Resellers of Business Software
BROOMFIELD, Colo., June 18, 2002 - Level 3 Communications, Inc. (Nasdaq:LVLT) announced today that it has completed its acquisition of Software Spectrum, Inc. (Nasdaq:SSPE) a global provider, marketer and reseller of business software.
Software Spectrum shareholders approved the merger at a special meeting in Dallas today and will receive $37 in cash from Level 3 for each share of Software Spectrum stock. The transaction is valued at approximately $109 million, adjusted for option proceeds and Software Spectrum's current cash position. All necessary regulatory approvals have been obtained. Software Spectrum will cease trading on The Nasdaq National Market and become an indirect, wholly owned subsidiary of Level 3.
"With this transaction, Level 3 is now one of the world's largest resellers of business software," said James Crowe, Level 3's chief executive officer. "In the coming months, we will be integrating Software Spectrum's operations with those of our recently acquired Corporate Software subsidiary. We expect to improve the companies' run-rate EBITDA by over $10 million within a year through cost savings opportunities. On a pro-forma basis, the combined entity had annual revenues of approximately $2.4 billion for the most recent fiscal year. Going forward, it will have global reach and a customer base that includes a majority of the Fortune 500 companies."
Crowe said that, in addition to short-term benefits, the acquisition positions Level 3's core communications business to take advantage of long-term dynamics that are reshaping the IT industry. "For decades, the IT industry has been shaped by data processing and data storage price-performance improvement rates that have been nothing short of astounding and communications costs that have, until recently, improved at far slower rates," Crowe said. "As a result, enterprises have generally located computing and storage resources at the point of use, even though many IT professionals have pointed out the benefits of making software functionality and data storage available as a commercial service accessed remotely over broadband networks. We believe the combination of Level 3's continuously upgradeable network, and the combination of Corporate Software and Software Spectrum's expertise in software lifecycle management and marketing, as well as strong customer relationships, position us to benefit as companies change the way they buy and use software capability. Our goal is to make the purchase of software services over the Level 3 network as simple and reliable as buying voice services is today."
Both Software Spectrum and Corporate Software sell and manage software products published by Microsoft, IBM/Lotus, Symantec, Adobe Systems and other leading software publishers. The companies market to large and mid-size enterprises through sales offices and operations centers in North America, Europe and the Asia-Pacific region.
The combined business will be headquartered in Dallas and operate under the name Software Spectrum. It will have more than 13,000 customers in more than 125 countries. Judy Odom, Software Spectrum's co-founder and CEO, will serve as chief executive. Howard Diamond, former chief executive of Corporate Software, will become Software Spectrum's chairman. Keith Coogan will be president and chief operating officer.
"We're pleased that this transaction produced substantial value for Software Spectrum shareholders," Odom said. "We believe it will produce significant value for our customers as well. The new Software Spectrum will have a cost structure and market presence that are unmatched in the industry, enabling us to be an even stronger advocate for our customers with software publishers."
Said Diamond: "Software marketing and distribution is a dynamic business in which operating efficiencies and growth are key to providing a competitive and compelling customer offering. Through integration, we will be able to leverage the best practices of both companies to enhance the level of service we provide to all our customers and help them derive even more business value from their information technology investment."
Level 3 expects the acquisitions will also benefit (i)Structure, its existing information services subsidiary, by leveraging the longstanding customer relationships Software Spectrum and Corporate Software have with leading corporations around the world.
Mellon Investor Services (800-777-3674) will serve as the disbursing agent for this transaction. The disbursing agent will mail instructions to registered shareholders that explain the required steps to be taken to receive the merger consideration. Beneficial owners should contact their broker for information concerning the steps that they need to take to receive the merger consideration.
About Level 3 Communications
Level 3 Communications, Inc. (NASDAQ: LVLT), an international communications company, operates one of the largest Internet backbones in the world, connecting 180 markets in 18 countries. The company serves a broad range of wholesale, enterprise and content customers with a comprehensive suite of services including: Internet Protocol (IP) services, broadband transport and infrastructure services, colocation services, voice and voice over IP services, content delivery and media distribution services. These services provide the building blocks to enable Level 3’s customers to meet their growing demands for advanced communications solutions. The company’s Web address is www.Level3.com.
"Level 3 Communications,” "Level 3," the red 3D brackets and the Level 3 Communications logo are registered service marks of Level 3 Communications, LLC in the United States and/or other countries. Level 3 services are provided by wholly owned subsidiaries of Level 3 Communications, Inc. Any other service, product or company names recited herein may be trademarks or service marks of their respective owners.
Forward-Looking Statement
Some of the statements that we make in this press release are forward looking in nature. These statements are based on management’s current expectations or beliefs. These forward looking statements are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside our control, which could cause actual events to differ materially from those expressed or implied by the statements. The most important factors that could prevent us from achieving our stated goals include, but are not limited to our ability to: successfully integrate acquisitions; increase the volume of traffic on our network; defend our intellectual property and proprietary rights; develop new products and services that meet customer demands and generate acceptable margins; successfully complete commercial testing of new technology and information systems to support new products and services; attract and retain qualified management and other personnel; and meet all of the terms and conditions of our debt obligations. Additional information concerning these and other important factors can be found within Level 3’s filings with the Securities and Exchange Commission. Statements in this press release should be evaluated in light of these important factors. Level 3 is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
