$25 billion to buy Level 3 Communications? It's a deal! Image source: Getty Images.

What happened

As recently as last week, it was only a rumor, but now it's officially official: CenturyLink (LUMN -2.60%) is buying Level 3 Communications (LVLT). Earlier this morning, internet service provider CenturyLink confirmed that it has reached an agreement with Level 3 to acquire the internet backbone operator in a deal valued at $25 billion, or $34 billion counting the debt CenturyLink will be assuming.

The market's reaction to the news couldn't be more different today from what we saw last week. Back then, investors hailed the prospect of a "merger of equals" in which neither company would overpay for the other, and bid up the shares of both companies. Today, we know that CenturyLink will be paying through the nose for Level 3, and investors are objecting to the price tag. As of 11 a.m. EDT Monday, CenturyLink's stock price was down 11.3% in response to the news, while Level 3 shares are up 4.3% from where they closed on Friday.

So what

What has CenturyLink shareholders so upset? It can't be the merger itself, which they cheered last week -- so it's got to be the price CenturyLink is paying.

According to a press release issued by the company, CenturyLink will pay $26.50 in cash for every share of Level 3 it acquires, and furthermore compensate Level 3 shareholders with 1.4286 shares of CenturyLink stock for each Level 3 share they currently own. CenturyLink says the combined value of its purchase price is $66.50 per share -- or nearly $20 more than what Level 3 shares cost less than one week ago. Additionally, CenturyLink will be assuming Level 3's $9.5 billion worth of net debt.

Now what

That's a steep premium CenturyLink is paying for its new prize. And yet, as of today, Level 3 stock still costs barely $56.50 a share -- so for each share you own (or buy), there's the potential to earn about $10 more in profit.

Management anticipates closing this transaction before the end of Q3 2017, so basically one year from today. Assuming the deal does close, and closes on time, that means new investors have the opportunity to lock in a nearly 18% profit by buying shares of Level 3 Communications -- before CenturyLink does.