Level 3 makes bid for Williams

Level 3 Communications has offered to purchase bankrupt Williams Communications for $1.08 billion, according to an article in The Wall Street Journal.

The offer is conditioned on Williams having at least $450 million in cash on its balance sheet, which would in effect cut the cash value of the proposal to $630 million. Level 3 is also including $50 million in stock as part of the deal.

The move marks Level 3’s first attempt to take advantage of the current downturn and become an industry consolidator.

The company put itself in this position earlier in the month by closing on a $500 million funding round, which included an investment by Warren Buffett’s Berkshire Hathaway and has helped to drive Level 3’s stock up nearly 100% over the past two and a half weeks. “We sought and received this investment for a straightforward reason,” said CEO James Crowe at the time the investment was announced. “We believe consolidation opportunity in this industry is at an extraordinarily high level.”

At the time the funding was announced, Crowe said the company would seek to purchase assets that would quickly and easily add to its customer base. With this offer, Level 3 seems to be sticking to that plan. Williams is a wholesale carrier like Level 3 and has some big names among its customers, most notably SBC Communications.

The chances of the proposal going through are unclear at this time, however. Officials from Level 3 declined to comment. A spokeswoman for Williams confirmed the company has received a bid from Level 3, would not elaborate.

The bid would have to beat out another deal Williams is currently negotiating with Leucadia National, which is reportedly more generous to Williams’ bondholders. It would also have to gain bankruptcy court approval, which by its nature would open the door to additional bids for Williams.